January 20, 2017

British Labor Party leader argues for maximum wage

institute for Policy Studies -In 1942, Franklin Roosevelt advanced what may have been the most politically daring policy proposal of his entire presidency. FDR called for the equivalent of a maximum wage. No individual American after paying taxes, Roosevelt declared, should have an income over $25,000, about $370,000 today.

A half-century later, in 1992, Bernie Sanders — then a relatively new member of the House of Representatives — marked the 50th anniversary of FDR’s maximum wage initiative. Sanders placed a commentary on FDR’s 1942 proposal in the Congressional Record.

Last week, in the 75th anniversary year of Roosevelt’s 1942 proposal, British Labor Party leader Jeremy Corbyn gave FDR’s income cap idea a considerably wider public airing. In a series of media interviews, Corbyn called for a ceiling on UK individual income.

“There ought to be a maximum wage,” Corbyn told The Herald, a Scottish newspaper. “The levels of inequality in Britain are getting worse.”

The Labor Party leader repeated that call for “some kind of high-earnings cap” the same day in a radio interview with the BBC.

“We cannot set ourselves as being a sort of grossly unequal bargain basement economy on the shores of Europe,” Corbyn explained. “If we want to live in a more egalitarian society and fund our public services, we cannot go on creating worse levels of inequality.”

Right-wing think tanks chimed in with more vituperation. Corbyn, the Adam Smith Institute charged, had gone “bananas.” The leader of Donald Trump’s favorite UK party, the anti-immigrant UKIP, claimed that Corbyn was practicing the “politics of envy.”

Franklin Roosevelt’s critics made the same sort of hyper-ventilating attacks 75 years ago when FDR proposed his cap on the income of the awesomely affluent. In the end, Roosevelt didn’t get from Congress everything he wanted on the pay-cap front. But the political courage he showed helped pave the way for the much more equal — and average-people friendly — America of the mid-20th century.


Anonymous said...

While this idea has considerable merit, the implied result, on paper, would likely have a significantly different outcome, in practice.

I do not know how monies are regulated and taxed in England but in America our wealthiest people may not have any "wage" at all. Most of them make their exorbitant incomes from capitol gains, investment portfolios and so-called "merit based" bonuses, fees and commissions which according to the US Tax Code is not classified as a "wage" and in some cases is not even considered an "income". (Perhaps you remember when, for example, in 2010–11 Oracle's founder and CEO Larry Ellison made only $1 in salary, but earned over $77 million in other forms of compensation.)

Without significant changes in what our code designates as "income" the ultimate result of this sort of legislation, at least in America, would be to place a ceiling on access to monies earned by "workers" while in no way addressing the truly out of control funneling of wealth towards the wealthiest owners, hedge fund managers and financiers that are currently bankrupting our society.

Anonymous said...

This is a debate that is being revisited or renewed for good reason as the original reforms from FDR's time had been neutered successfully and the problems they addressed predictably arose again. What the economic libertarians cannot explain is how and why the relatively strong economy of the 1950s occurred at a time of high taxation on the upper brackets, high corporate taxes, and strong regulation on monopolies.