5 ms·

As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum aft

As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.

xyzzy4 11y ago
It would discourage innovation for a lot of reasons, and one is that high earners would move to other countries.
- ZenoArrow 11y ago
  If they want to move, let them. The opportunities for making money would still be present. There's a bizarre notion going around that protecting the economy requires protecting the rich. However if you look at it, it doesn't make any sense. The strength of an actor in the economic system is directly related to their participation in that system. The rich are where they are because they hoard more of their wealth. Hoarded wealth slows down an economy. The rich are poor economic actors, let them hoard their money elsewhere.
  - shitgoose 11y ago
    "The opportunities for making money would still be present." who will take advantage of those opportunities? people who take advantage of opportunities to make money have already moved out, haven't they?
    - ZenoArrow 11y ago
      Let's use a hypothetical example. We bring in the wage cap, some wealthy people move elsewhere. Let's say one of the wealthy people ran a profitable supermarket. Are you saying we couldn't find someone who lived in the country to run a supermarket in the same location?
- crdoconnor 11y ago
  High earners don't even move from New York to New Jersey when New York raises taxes (google it).
nedwin 11y ago
Most wealth doesn't come from "wages" or salaries. It comes from inheritance and increasing value of assets. Many high profile CEO's are worth tens / hundreds of millions but take $1 salaries.
- ZenoArrow 11y ago
  Inheritance is a separate issue, but one that you're right to raise. However, there's no reason you can't do both (set a maximum wage and set limits on inheritance).
  - douche 11y ago
    What are you going to do, confiscate inheritances? The government has already taken their cut of the wealth that goes into an inheritance on the first go-around, and they are actively eroding it already by printing additional money and inflating the currency. They shouldn't get to double-dip into the hard-earned and carefully stewarded generational wealth of my family, just because somebody died. Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling.
    - ZenoArrow 11y ago
      > "What are you going to do, confiscate inheritances?" You can call it that if you want. With regards to inheritance, I'm suggesting setting a maximum amount that any single individual can inherit. The rest can go towards funding public infrastructure. > "Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling." I'm not arguing for everyone to be poor, I'm suggesting that there should be a limit on how much richer someone can be. It's the ratio which is important. If a ratio is set, and you want to raise the upper bound, all you need to do is raise the lower bound along with it.
jblow 11y ago
If you set a maximum wage like that, a lot of what is good in society would not happen because people would not be able to amass capital. For example, you would not have a SpaceX or a Tesla. You would not have Y Combinator as it exists today. You would not even have the video game that I am about to release next month. Yes, there are a lot of jerks who amass capital and do nothing with it or who do irresponsible things. But you also have people who use it to work very hard to make positive change in the world, and even if those people are in the minority, their impact is very large.
- tahssa 11y ago
  Capital accumulation can still happen without wage accumulation. Just don't pay yourself too much and keep the money inside the business. Naturally the money will get spent on building things like tesla.
  - PeterisP 11y ago
    Tesla happened because individuals were able to take extremely large sums out of an unrelated business (Paypal), as did a huge part of early stage tech investments, funded at that point mainly by individuals who got multimillion exits in their previous businesses. If the money had been kept inside business, then you'd have the innovation rate that internal subsidiaries of IBM achieved, not the innovation rate of the Silicon Valley.
    - Apocryphon 11y ago
      Or perhaps with sufficient tax revenue in its coffers, the federal government would be able to properly fund NASA, or a Manhattan Project aimed at reducing oil dependency.
- bjshepard 11y ago
  You might also have space colonization or a world without cars?
- DannoHung 11y ago
  I don't think the GP's suggestion is smart or good either, but I don't see how it would fail to allow for capital accrual. It's not like you have to pay yourself all your earnings in wages as the owner of a business.
schmichael 11y ago
Problems with this: 1. "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live). 2. even if #1 could be solved with some complex formula, it's very easy to argue a maximum imposes a hard limit on how much work a person is willing to do. Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit? 3. estates are the extreme problem for 1 & 2: if they're counted against maximum wages than recipients of large estates likely have no incentive to ever work. If they're not counted then maximum wages are severely limited in its ability to affect change. Perhaps a complex enough formula exists to make maximum wages work, but given how easily gamed our complex tax code is in the US, I can't imagine it's feasible.
- ZenoArrow 11y ago
  > "Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit?" Whilst I can't speak directly for Elon, it does appear that his work is targeted at benefitting mankind. I'm sure that is plenty of incentive on its own. > "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live)." Sure, there will be loopholes, but let's start with the basics and wait for the loopholes to emerge. Tackling wages and inheritance should be enough to start off with.
  - schmichael 11y ago
    Perhaps a better critique of a maximum wage would be: What does it solve that graduated income, property, and estate taxes do not? I can't imagine it could possibly be any less complex than a tax code since it needs to contain the same estimations of wealth ("wage" in your approach).
SwellJoe 11y ago
That's addressing the wrong side of the equation. The problem is phrased as "income inequality", but that's not the actual problem that needs solving (it doesn't necessarily hurt someone for one person to have a billion dollars, unless they use that money to influence policy in ways that harm others). The actual problem, as I see it, or, at least the variable that needs adjusting is the other side. The problem is that the middle class is nearly extinct in the US, huge swaths of people will never know a life free of debt, home ownership is a fantasy from another era, and rents are being driven up through a variety of circumstances mostly outside the control of the people those rising rents most impact. So, adjusting the other side of the equation (how many people are living in poverty or debt) is the one that minimizes harm. Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves. Capping wages does nothing to solve that problem. pg, despite being a very bright and extremely sincere and decent person, is living in a world quite far removed from most American's reality and gets a lot of things wrong (sometimes hilariously so), based on that disconnect. But, a maximum wage is a ridiculous rebuttal, IMHO.
- ZenoArrow 11y ago
  > "But, a maximum wage is a ridiculous rebuttal, IMHO." Of course you're entitled to your opinion, but let's look at why a maximum wage can be used to tackle economic inequality, perhaps you'll not think it's quite so ridiculous after that. > "The actual problem, as I see it, or, at least the variable that needs adjusting is the other side." The main reason that a maximum wage impacts the poorest amongst us is that it provides a mechanism by which poverty and wealth can be linked. For example, let's say every US state adopts a $15 per hour minimum wage. Let's now state that the maximum wage is set at 500x the minimum wage, so $7500 per hour. If the minimum wage worker works 40 hours a week, 52 weeks a year, they'll get $31,200 per year (before tax). If the maximum wage worker works the same number of hours they'll earn $15,600,000 (before tax). Let's say the bottom rate of tax is 15%, and the top rate of tax is 40%. What does that leave us with... The minimum wage worker earned $26,520 a year. The maximum wage worker earned $9,360,000 a year. What we've set here are upper and lower bounds on how much someone can earn. Notice that we still have the rich and the poor, and we haven't taken away the incentive to want to get rich. What we have done is slowed down the rate at which the gap between the rich and poor grows, which is at the core of economic inequality. Inherited wealth is also an issue, but at least it would tackle the rate of change in newly generated wealth. What does this do to an economy? First of all, the rich now have an extra incentive to raise the income of the poor. If the rate between the minimum and the maximum wage is fixed, raising the minimum wage will also raise the maximum wage. Secondly, it channels money that is more likely to have been hoarded back into economic activity. Money only works when it is traded, not when it is hoarded, hoarding past a certain level of security is a waste of economic potential. > "Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves." I'm reminded of this... http://www.goodreads.com/quotes/328134-socialism-never-took-root-in-america-because-the-poor-see http://www.goodreads.com/quotes/328134-socialism-never-took-... Being on the poor end of the spectrum leaves you more vulnerable to economic exploitation. If a maximum wage reduces the incentive for economic exploitation, then I see no reason why it wouldn't be welcomed. If you want a concrete example of economic exploitation, take a look at Walmart: http://www.alternet.org/labor/ugly-walmart-truth-some-managers-treat-workers-dirt http://www.alternet.org/labor/ugly-walmart-truth-some-manage... > "rents are being driven up through a variety of circumstances mostly outside the control of the people those rising rents most impact" Setting a maximum wage would impact the concentration of resources such as housing. More landlords = more competition = more price stability.
innocentoldguy 11y ago
If we set a maximum wage, driven people would simply move to another country. There is plenty of evidence for that as well. The Beatles, for example, came to America to avoid the grievous taxes being levied in England. U.S. companies locate offices in more tax-friendly locales all the time too.
- ZenoArrow 11y ago
  > "There is plenty of evidence for that as well." Okay, can you show me some evidence? > "The Beatles, for example, came to America to avoid the grievous taxes being levied in England. U.S. companies locate offices in more tax-friendly locales all the time too." Both of those are examples of tax dodges. Maximum wage is different, in that people would be required to live in the country they made their main income in. Sure, you could move to the Cayman Islands, but good luck finding enough work there. We should be closing tax loopholes too, it's not an either/or situation, we can do both.
  - dinkumthinkum 11y ago
    I think you are missing basic principles of economics. Your arbitrary cap on income would move companies and jobs to countries free of weird policies like that.
    - ZenoArrow 11y ago
      If old companies move, new companies would spring up to take their place. The reason this would happen is because the demand is still there. People don't stop buying clothes just because a clothes shop stops trading in their country.
      - douche 11y ago
        They do if the industry leaves, and the wealth creation that that industry provided dries up. Look at the Rust Belt.
dinkumthinkum 11y ago
How about maybe that is sort immoral, let alone not serving any purpose of economic inequality. Now, your destroying entire industries for people that make things for multi-millionaires. Its just terribly naive, I'm not sure what this would achieve. Honestly, I'm not sure why you do not just argue for outright communism.
- ZenoArrow 11y ago
  > "How about maybe that is sort immoral" How is it immoral to set upper and lower bounds on what people can earn? Do you really think it's immoral that someone can only earn 1000x more (for example) than the poorest amongst us? Do you really find that oppressive? > " Now, your destroying entire industries for people that make things for multi-millionaires." You're not destroying industries, you're curbing the rate at which private wealth can be accumulated. > "Honestly, I'm not sure why you do not just argue for outright communism." Setting a maximum wage is socialist, but socialism is a broad church, communism is not the only system in the socialist umbrella.
  - dinkumthinkum 11y ago
    I do think saying someone cannot be paid more than X by law is immoral and draconian. It's also a very naive "solution." It's like a child saying "nah nah nah, we're equal now" or something to that effect.

xyzzy4 11y ago

It would discourage innovation for a lot of reasons, and one is that high earners would move to other countries.

ZenoArrow 11y ago
If they want to move, let them. The opportunities for making money would still be present. There's a bizarre notion going around that protecting the economy requires protecting the rich. However if you look at it, it doesn't make any sense. The strength of an actor in the economic system is directly related to their participation in that system. The rich are where they are because they hoard more of their wealth. Hoarded wealth slows down an economy. The rich are poor economic actors, let them hoard their money elsewhere.
- shitgoose 11y ago
  "The opportunities for making money would still be present." who will take advantage of those opportunities? people who take advantage of opportunities to make money have already moved out, haven't they?
  - ZenoArrow 11y ago
    Let's use a hypothetical example. We bring in the wage cap, some wealthy people move elsewhere. Let's say one of the wealthy people ran a profitable supermarket. Are you saying we couldn't find someone who lived in the country to run a supermarket in the same location?
crdoconnor 11y ago
High earners don't even move from New York to New Jersey when New York raises taxes (google it).

nedwin 11y ago

Most wealth doesn't come from "wages" or salaries. It comes from inheritance and increasing value of assets. Many high profile CEO's are worth tens / hundreds of millions but take $1 salaries.

ZenoArrow 11y ago
Inheritance is a separate issue, but one that you're right to raise. However, there's no reason you can't do both (set a maximum wage and set limits on inheritance).
- douche 11y ago
  What are you going to do, confiscate inheritances? The government has already taken their cut of the wealth that goes into an inheritance on the first go-around, and they are actively eroding it already by printing additional money and inflating the currency. They shouldn't get to double-dip into the hard-earned and carefully stewarded generational wealth of my family, just because somebody died. Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling.
  - ZenoArrow 11y ago
    > "What are you going to do, confiscate inheritances?" You can call it that if you want. With regards to inheritance, I'm suggesting setting a maximum amount that any single individual can inherit. The rest can go towards funding public infrastructure. > "Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling." I'm not arguing for everyone to be poor, I'm suggesting that there should be a limit on how much richer someone can be. It's the ratio which is important. If a ratio is set, and you want to raise the upper bound, all you need to do is raise the lower bound along with it.

jblow 11y ago

If you set a maximum wage like that, a lot of what is good in society would not happen because people would not be able to amass capital. For example, you would not have a SpaceX or a Tesla. You would not have Y Combinator as it exists today. You would not even have the video game that I am about to release next month. Yes, there are a lot of jerks who amass capital and do nothing with it or who do irresponsible things. But you also have people who use it to work very hard to make positive change in the world, and even if those people are in the minority, their impact is very large.

tahssa 11y ago
Capital accumulation can still happen without wage accumulation. Just don't pay yourself too much and keep the money inside the business. Naturally the money will get spent on building things like tesla.
- PeterisP 11y ago
  Tesla happened because individuals were able to take extremely large sums out of an unrelated business (Paypal), as did a huge part of early stage tech investments, funded at that point mainly by individuals who got multimillion exits in their previous businesses. If the money had been kept inside business, then you'd have the innovation rate that internal subsidiaries of IBM achieved, not the innovation rate of the Silicon Valley.
  - Apocryphon 11y ago
    Or perhaps with sufficient tax revenue in its coffers, the federal government would be able to properly fund NASA, or a Manhattan Project aimed at reducing oil dependency.
bjshepard 11y ago
You might also have space colonization or a world without cars?
DannoHung 11y ago
I don't think the GP's suggestion is smart or good either, but I don't see how it would fail to allow for capital accrual. It's not like you have to pay yourself all your earnings in wages as the owner of a business.

schmichael 11y ago

Problems with this: 1. "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live). 2. even if #1 could be solved with some complex formula, it's very easy to argue a maximum imposes a hard limit on how much work a person is willing to do. Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit? 3. estates are the extreme problem for 1 & 2: if they're counted against maximum wages than recipients of large estates likely have no incentive to ever work. If they're not counted then maximum wages are severely limited in its ability to affect change. Perhaps a complex enough formula exists to make maximum wages work, but given how easily gamed our complex tax code is in the US, I can't imagine it's feasible.

ZenoArrow 11y ago
> "Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit?" Whilst I can't speak directly for Elon, it does appear that his work is targeted at benefitting mankind. I'm sure that is plenty of incentive on its own. > "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live)." Sure, there will be loopholes, but let's start with the basics and wait for the loopholes to emerge. Tackling wages and inheritance should be enough to start off with.
- schmichael 11y ago
  Perhaps a better critique of a maximum wage would be: What does it solve that graduated income, property, and estate taxes do not? I can't imagine it could possibly be any less complex than a tax code since it needs to contain the same estimations of wealth ("wage" in your approach).

SwellJoe 11y ago

That's addressing the wrong side of the equation. The problem is phrased as "income inequality", but that's not the actual problem that needs solving (it doesn't necessarily hurt someone for one person to have a billion dollars, unless they use that money to influence policy in ways that harm others). The actual problem, as I see it, or, at least the variable that needs adjusting is the other side. The problem is that the middle class is nearly extinct in the US, huge swaths of people will never know a life free of debt, home ownership is a fantasy from another era, and rents are being driven up through a variety of circumstances mostly outside the control of the people those rising rents most impact. So, adjusting the other side of the equation (how many people are living in poverty or debt) is the one that minimizes harm. Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves. Capping wages does nothing to solve that problem. pg, despite being a very bright and extremely sincere and decent person, is living in a world quite far removed from most American's reality and gets a lot of things wrong (sometimes hilariously so), based on that disconnect. But, a maximum wage is a ridiculous rebuttal, IMHO.

ZenoArrow 11y ago
> "But, a maximum wage is a ridiculous rebuttal, IMHO." Of course you're entitled to your opinion, but let's look at why a maximum wage can be used to tackle economic inequality, perhaps you'll not think it's quite so ridiculous after that. > "The actual problem, as I see it, or, at least the variable that needs adjusting is the other side." The main reason that a maximum wage impacts the poorest amongst us is that it provides a mechanism by which poverty and wealth can be linked. For example, let's say every US state adopts a $15 per hour minimum wage. Let's now state that the maximum wage is set at 500x the minimum wage, so $7500 per hour. If the minimum wage worker works 40 hours a week, 52 weeks a year, they'll get $31,200 per year (before tax). If the maximum wage worker works the same number of hours they'll earn $15,600,000 (before tax). Let's say the bottom rate of tax is 15%, and the top rate of tax is 40%. What does that leave us with... The minimum wage worker earned $26,520 a year. The maximum wage worker earned $9,360,000 a year. What we've set here are upper and lower bounds on how much someone can earn. Notice that we still have the rich and the poor, and we haven't taken away the incentive to want to get rich. What we have done is slowed down the rate at which the gap between the rich and poor grows, which is at the core of economic inequality. Inherited wealth is also an issue, but at least it would tackle the rate of change in newly generated wealth. What does this do to an economy? First of all, the rich now have an extra incentive to raise the income of the poor. If the rate between the minimum and the maximum wage is fixed, raising the minimum wage will also raise the maximum wage. Secondly, it channels money that is more likely to have been hoarded back into economic activity. Money only works when it is traded, not when it is hoarded, hoarding past a certain level of security is a waste of economic potential. > "Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves." I'm reminded of this... http://www.goodreads.com/quotes/328134-socialism-never-took-root-in-america-because-the-poor-see http://www.goodreads.com/quotes/328134-socialism-never-took-... Being on the poor end of the spectrum leaves you more vulnerable to economic exploitation. If a maximum wage reduces the incentive for economic exploitation, then I see no reason why it wouldn't be welcomed. If you want a concrete example of economic exploitation, take a look at Walmart: http://www.alternet.org/labor/ugly-walmart-truth-some-managers-treat-workers-dirt http://www.alternet.org/labor/ugly-walmart-truth-some-manage... > "rents are being driven up through a variety of circumstances mostly outside the control of the people those rising rents most impact" Setting a maximum wage would impact the concentration of resources such as housing. More landlords = more competition = more price stability.

innocentoldguy 11y ago

If we set a maximum wage, driven people would simply move to another country. There is plenty of evidence for that as well. The Beatles, for example, came to America to avoid the grievous taxes being levied in England. U.S. companies locate offices in more tax-friendly locales all the time too.

ZenoArrow 11y ago
> "There is plenty of evidence for that as well." Okay, can you show me some evidence? > "The Beatles, for example, came to America to avoid the grievous taxes being levied in England. U.S. companies locate offices in more tax-friendly locales all the time too." Both of those are examples of tax dodges. Maximum wage is different, in that people would be required to live in the country they made their main income in. Sure, you could move to the Cayman Islands, but good luck finding enough work there. We should be closing tax loopholes too, it's not an either/or situation, we can do both.
- dinkumthinkum 11y ago
  I think you are missing basic principles of economics. Your arbitrary cap on income would move companies and jobs to countries free of weird policies like that.
  - ZenoArrow 11y ago
    If old companies move, new companies would spring up to take their place. The reason this would happen is because the demand is still there. People don't stop buying clothes just because a clothes shop stops trading in their country.
    - douche 11y ago
      They do if the industry leaves, and the wealth creation that that industry provided dries up. Look at the Rust Belt.

dinkumthinkum 11y ago

How about maybe that is sort immoral, let alone not serving any purpose of economic inequality. Now, your destroying entire industries for people that make things for multi-millionaires. Its just terribly naive, I'm not sure what this would achieve. Honestly, I'm not sure why you do not just argue for outright communism.

ZenoArrow 11y ago
> "How about maybe that is sort immoral" How is it immoral to set upper and lower bounds on what people can earn? Do you really think it's immoral that someone can only earn 1000x more (for example) than the poorest amongst us? Do you really find that oppressive? > " Now, your destroying entire industries for people that make things for multi-millionaires." You're not destroying industries, you're curbing the rate at which private wealth can be accumulated. > "Honestly, I'm not sure why you do not just argue for outright communism." Setting a maximum wage is socialist, but socialism is a broad church, communism is not the only system in the socialist umbrella.
- dinkumthinkum 11y ago
  I do think saying someone cannot be paid more than X by law is immoral and draconian. It's also a very naive "solution." It's like a child saying "nah nah nah, we're equal now" or something to that effect.