How might a maximum wage work?

One of Jeremy Corbyn’s proposals hit the headlines last month – a maximum wage. It stands to reason that the public would be behind this idea, in theory.

The world’s richest eight people (all men, by the way) own as much wealth as the poorest 50%.

The 4th January this year was known as Fat Cat Wednesday. This was where the FTSE100 bosses have already earned the average UK annual salary (£28,000) in just two and a half days – assuming that the CEOs work an average of 12 hours a day, that’s £1000 per hour!

So, it isn’t surprising that 64% said they would support legislation which stopped the highest paid employee in a company earning more than twenty times the company’s average employee salary.

But how would it work? 

Obviously it isn’t as simple as ruling, for example the minimum wage is £7.20 per hour, the maximum wage is £72.50 per hour! There would be an uproar if a fixed figure was given for a maximum wage, and lots of businesses would leave the UK as a result.

Perhaps a ratio system could work though? In that, the CEO of a company cannot earn more than 20 times the lowest paid employee of that same company, for example.

Could it work in the UK? 

One of the UK’s most renowned companies, the John Lewis Partnership, already has its own system in place. As all employees are share holders, everyone gets a share of the profits (like dividends) as a bonus. In the 1930s, the CEO could only earn four times the amount of the average father of four. Things have changed a bit with the times, and now the chairman receives (at most) 75 times that of the average pay of John Lewis workers.

The cons

The pay scale gap may be thought too small for some people. On a (very) small scale, I have experience of this with my theatre company. Due to funding constraints, we had a company wage, not miles away from the London Living Wage (in line with our Equity Union minimum rates, as most theatres outside of the West End do). But, as our interns were paid minimum wage, this meant there was only a few pounds an hour difference between a head of department and an intern – this caused some upset.

As with the minimum wage, it would be difficult to regulate to ensure employers are implementing it.

The pros

Lower wages would be increased as a strategy to keep the larger salaries.

For those people at the top, there would be less argument for the top rate tax rate to be increased.

Higher staff retention and less sick days in more equal operating work places.

So, to me, it’s an interesting and positive policy. Not one that will be implemented right now, I know, but certainly worth the opposition continuing to research for the future and continue to debate with our current government.