For Republican members of Congress and cable news pundits, a cap on the earnings of the super rich might sound like a dystopian nightmare. Yet, as author Sam Pizzigati argues in his new book, The Case for a Maximum Wage, those who are not ardent free marketeers should give the idea some serious consideration—not only as a desirable policy, but also one that might be more practical than some imagine.
In 2010, trade union leaders presented elites at Davos with a proposal for a ratio-based maximum wage—something proposed in the United States by Amalgamated Transit Union President Larry Hanley. Hanley’s version would mandate that a top executive’s pay be no more than 100 times the salary of the company’s lowest-paid worker. In other words, if the receptionist or janitor makes $35,000 per year, the CEO would take home no more than $3.5 million. To raise his or her pay further, the boss would have to bring up the bottom as well.
While a 100:1 gap comes nowhere close to rigidly enforced equality, it would break from current norms in the United States, where a CEO in one of the country’s largest 350 firms earns an average of 271 times that of a typical worker, according to the Economic Policy Institute.
As Pizzigati—a veteran labor journalist, fellow at the Institute for Policy Studies, and editor of Inequality.org—points out, the Mondragón cooperatives in Spain have implemented much tighter ratios to control the pay of those at the top, to good result. Elsewhere, advocates have won intermediary steps toward a maximum wage. The city of Portland, Oregon, for one, adopted a statute that went into effect this year creating a tax penalty for companies that exceed a 100:1 pay ratio.
Of course, since much of the vast wealth of the super rich comes not from salaries but from stock options and returns on accumulated assets, a maximum wage would address only one aspect of inequality. Yet Pizzigati argues that…