Maximum Wage Policy

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= “A drastic reduction in the purchasing power of the richest would in itself have a substantial impact on the reduction of emissions at global level”. [1]


Jason Hickel:

'One approach would be to introduce a cap on wage ratios – what some have called a maximum wage policy. Sam Pizzigati, an associate fellow at the Institute for Policy Studies, argues that we should cap the after-tax wage ratio at 10 to one. This is an elegant solution that would immediately distribute income more fairly, and it’s not unheard of.

Mondragon, for instance – a huge workers’ co-operative in Spain – has rules stating that executive salaries cannot be more than six times higher than what the lowest- paid employee receives in the same enterprise. This could be done on a national scale, too, by saying that incomes higher than a given multiple of the national minimum wage would face a 100% tax.

Policies like this make intuitive sense to people. A 2017 poll found that a majority of the British public are in favour of a maximum wage policy. After all, we choose to limit all sorts of things that are dangerous in excess. We limit how fast you can drive your car on public roads, how much alcohol you can drink before driving, how much sugar can be in children’s breakfast cereals. We limit smoking in public spaces, addictive substances and weapons sales. Once we realise that excessive income destroys the ecology on which our civilisation depends, we can choose to limit that too.

What’s exciting about this approach is that it has a direct positive impact on human well-being and on the living world. As societies become more egalitarian, people become happier, less anxious and more content with their lives. They develop a greater sense of solidarity with their neighbours and peers, which means they feel less pressure to pursue ever-higher incomes and more glamorous status goods. Equality helps liberate people from the rat race of perpetual consumerism. This is why researchers find that more egalitarian societies tend to have significantly less ecological impact.

Take Denmark, for example. Consumer studies show that, because Denmark is more equal than most other high-income countries, people buy fewer clothes – and keep them for longer – than their counterparts elsewhere. And firms spend less money on advertising, because people just aren’t as interested in unnecessary luxury purchases.

But it’s not just income inequality that’s a problem – it’s wealth inequality too. In the United States, for instance, the richest 1% have nearly 40% of the nation’s wealth. The bottom 50%, by contrast, have almost nothing: only 0.4%. On a global level, it’s worse still: the richest 1% own around half of all the wealth in the world.

The problem with this kind of inequality is that rich people become rentiers. Because they accumulate money and assets far beyond what they could ever use, they rent it out to others who don’t have these things – be it in the form of properties, patent licences, loans, whatever. The income they get from this is called "passive income", because it accrues automatically to people who hold assets without any labour on their part. But from the perspective of everyone else it is anything but passive: people have to scramble to work, produce and earn beyond what they would otherwise need – which creates additional ecological impact – simply in order to pay rents and debts to people living in wealth.

In a way, it’s a bit like modern-day serfdom. And just like serfdom, it has serious consequences for our living world. Serfdom was an ecological disaster because lords forced peasants to extract more from the land than they otherwise needed – all in order to pay tribute. During the feudal period in Europe, this led to a progressive degradation of forests and soils. When societies are unbalanced, ecologies become unbalanced too. Something similar is happening today: all of us who owe rents and debts are under tremendous pressure to find ways to pay tribute to people with wealth.

One way to solve this problem is with a Wealth Tax – an idea that is presently gaining a lot of steam." (