Would a maximum wage ratio work?

[Loren Pechtel]

The biggest effect would be to greatly increase outsourcing. You would end up with management teams contracting out everything.

It is the perfect plan to create a permanent underclass. Dump all your low skilled employees for good, outsource and bring in automation. It is pretty much saying low skilled people are unworthy of a job, making a great many of them unemployable except for shitty jobs at mom and pops that don't make enough money to be subject to the rules. Google and Facebook I'm sure would love the idea, seeing as they need a lot of high skilled high pay workers.

I don't think it would go that far. Rather, the low skill people would end up working for small companies that contracted with the big ones to do certain things. Or, when that didn't divide things up enough there would be intermediate layers.

For a simple example, consider a franchised fast food place. Everyone is low paid--the franchisee gets the profit, not a salary.

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Thus ensuring that wealth got turned into luxury spending instead of means of production. The result would be catastrophic in the long run. The ultra-rich are that way because of seeing things with a long time horizon. You're taking that away and thus taking away the incentive to plan ahead.

You might like the lack of a Wal-Mart but you would also take out basically every modern tech company.

Sorry, but this post makes no sense. Wealth getting turned into spending (luxury or otherwise) is the point. Wealth going into production only happens when there is demand from those spending money on the production to do so (trust me, I've been in these conversations as management). Unless we can show how we can save money or attain more sales, no capex plan will go through.

In other words, live high now and crash in the future when there's little investment.

You can't just destroy the wealth without also destroying what that wealth brings us.

 

[Jason Harvestdancer]

Jesse Ventura recently had a clip going around the internet talking about a maximum wage.

I don't like that idea because it limits the drive to do more. That being said, I like the idea of a maximum wage ratio. The biggest issue people have is that CEOs in America are making 380 times (on average) the salary of their average worker. If you said that the average ratio had to be 100 (as an example), a CEO could still make an obscene amount of money, but they have the option of making more by paying their workforce more. In other words, your lowest paid employee makes $20,000 a year, the CEO can make $2,000,000. If the CEO wants to make $3,000,000...then they need to pay all of the lowest paid employees $30,000.

My question to you all would be, why wouldn't this work? Be my devil's advocates please!

The first thing I could see is that you would have to make the rule be based on total compensation and not just salary (as the CEO's typically make much more off stock options anyway). I would also think you would need to define it as lowest paid full time employee and highest paid full time employee....but then companies would turn around and only have part time employees (are there laws against that?).

I could see some corporations leaving the US based on this, but more importantly I could see them outsourcing many more jobs to try to get their lowest worker's pay up as all the lower paid jobs would be shipped out of the company...so we would have to include outsourced jobs as part of the lowest paid employees (which might then force jobs back...probably not I know). I'm not sure how to deal with this portion yet and would have to think it through more.

What I would also see though is that the American Middle Class (AMC) would grow and when the AMC grows and has spending power, the economy does well. As the economy does well, more American jobs would be created (my company only hires when we can't meet customer demand...not when there are tax breaks). Customer demand is driven by people with money to burn that want a product. This would then drive the ability for the CEO's to pay their employees more and make more money themselves. AMC does well, everyone does well.

Thoughts?

I don't know but I think of a massively progressive tax on wealth, say, 90% of all assets over some ridiculously high number, say, $100m every 5 years or so would be a good idea.

A tax on wealth, or a net-worth tax. That would actually be a disaster.

Do you imagine that the wealthy have their net worth primarily in cash? Most of them have their net worth primarily in assets they would need to sell to pay the net-worth tax. It was the value of the shares of Microsoft that for a long time made Bill Gates the wealthiest man in the world. It is the value of the shares of Facebook, Amazon, etc, that make the owners fabulously wealthy.

If a net worth tax were implemented, assets would have to be sold to pay the tax. Contrary to popular opinion, they don't roll around in piles of cash.

 

[skepticalbip]

Jesse Ventura recently had a clip going around the internet talking about a maximum wage.

I don't like that idea because it limits the drive to do more. That being said, I like the idea of a maximum wage ratio. The biggest issue people have is that CEOs in America are making 380 times (on average) the salary of their average worker. If you said that the average ratio had to be 100 (as an example), a CEO could still make an obscene amount of money, but they have the option of making more by paying their workforce more. In other words, your lowest paid employee makes $20,000 a year, the CEO can make $2,000,000. If the CEO wants to make $3,000,000...then they need to pay all of the lowest paid employees $30,000.

My question to you all would be, why wouldn't this work? Be my devil's advocates please!

The first thing I could see is that you would have to make the rule be based on total compensation and not just salary (as the CEO's typically make much more off stock options anyway). I would also think you would need to define it as lowest paid full time employee and highest paid full time employee....but then companies would turn around and only have part time employees (are there laws against that?).

I could see some corporations leaving the US based on this, but more importantly I could see them outsourcing many more jobs to try to get their lowest worker's pay up as all the lower paid jobs would be shipped out of the company...so we would have to include outsourced jobs as part of the lowest paid employees (which might then force jobs back...probably not I know). I'm not sure how to deal with this portion yet and would have to think it through more.

What I would also see though is that the American Middle Class (AMC) would grow and when the AMC grows and has spending power, the economy does well. As the economy does well, more American jobs would be created (my company only hires when we can't meet customer demand...not when there are tax breaks). Customer demand is driven by people with money to burn that want a product. This would then drive the ability for the CEO's to pay their employees more and make more money themselves. AMC does well, everyone does well.

Thoughts?

I don't know but I think of a massively progressive tax on wealth, say, 90% of all assets over some ridiculously high number, say, $100m every 5 years or so would be a good idea.

A tax on wealth, or a net-worth tax. That would actually be a disaster.

Do you imagine that the wealthy have their net worth primarily in cash? Most of them have their net worth primarily in assets they would need to sell to pay the net-worth tax. It was the value of the shares of Microsoft that for a long time made Bill Gates the wealthiest man in the world. It is the value of the shares of Facebook, Amazon, etc, that make the owners fabulously wealthy.

If a net worth tax were implemented, assets would have to be sold to pay the tax. Contrary to popular opinion, they don't roll around in piles of cash.

That was the problem with inheritance taxes (functionally the same as wealth taxes). A family farm or business that had been in the family for five generations would have to be used for collateral for a loan to pay the tax at each generation. Eventually either the debt or the tax could not be serviced so the family farm or business had to be sold to cover it.

 

[Loren Pechtel]

That was the problem with inheritance taxes (functionally the same as wealth taxes). A family farm or business that had been in the family for five generations would have to be used for collateral for a loan to pay the tax at each generation. Eventually either the debt or the tax could not be serviced so the family farm or business had to be sold to cover it.

Yup, an in that case there's an easy fix:

Calculate the inheritance tax normally. However, when the tax is applied to an asset which is either indivisible (say, a house) or will be harmed by division (say, a farm, a sufficiently large share of a company to influence it's operation) the estate can convert the tax bill into a lien. Unlike a traditional lien this would be a percentage, not a dollar amount. The asset may be transferred by inheritance without triggering the lien (and if this results in two liens applying only the higher one is retained) and it may be transferred to someone else who also has a share of the asset subject to the lien without triggering it. Any other transfer triggers it, the government gets it's percentage at that point. (Although I think I would allow transfer to charity to simply wipe the lien out.)

Presto, the cases where the inheritance tax causes harm are exempted without going the Republican route of simply abolishing the inheritance tax.