On the Maximum Wage and Aspiration

In today’s article, Jack James responds to Oliver Simpkin’s article ‘On the Maximum Wage aka how to lose an election in one idea’. Jack studied Politics and Philosophy at Manchester University and is currently Secretary at Blackpool and Fylde Young Labour. He blogs personally at thefatiguingclimb.blogspot.co.uk

I’ve seen many arguments against the proposed Maximum Wage policy floated by Jeremy Corbyn recently, some are more reasonable than others, but the idea that it attacks aspiration is ridiculous. While it was presented poorly, it has the potential to be not only a good idea but a big vote winner and has consistently been shown to be so.

In a 2015 survey by the High Pay Centre, 66% of people were in favour of a Maximum Pay gap so that bosses would only earn a fixed amount more than an average employee. In research done by Oxfam in 2016, 64% of people favoured legislation that would mean bosses could only earn 20 times that of the lowest paid employee, 74% also said that business has a responsibility to reduce poverty and inequality.

It would be great if we could rely on Businesses to help tackle inequality by paying fairly, making sure all of their employees earned enough to live a decent life, but we simply cannot. In many cases, one of the very reasons unscrupulous bosses are able to line their pockets is exactly because employees are being exploited and underpaid. Average real earnings in Britain have declined by 10% since 2007, joint lowest in the OECD along with Greece. Meanwhile, the salaries of FTSE 100 CEO’s rose by 10% last year alone.

It’s ludicrous to think that by proposing to introduce a pay ratio we are attacking aspiration, taking the example from Jeremy Corbyn’s speech, if a ratio is set at 20 :1 and the lowest paid employee is earning the living wage at £16,000 per year, this would permit an executive to earn nearly £350,000. Most of us can never hope to earn that much in a year. What really crushes aspiration is a lack of opportunity. We want people to aspire to have successful careers and lead happy lives, to do this we need to make firms invest more in education and training. We need to make sure that people, no matter what age, have access to education so that they can retrain and switch careers if they want or need to.

Oliver says wage limiting policies will lose us votes in the de-industrialised north, I say that’s nonsense, people in the north don’t need high earning executives to aspire to be. They need opportunity, they need to be able to believe that working hard in school won’t be a waste of time. That when they leave school there will be jobs available to them. This year, over half of all graduates will go into non-graduate roles and if you want a graduate job, you’d better be willing to move to London or another city because elsewhere high skilled professional jobs are few and far between.

Finally, Oliver goes wrong when he says that by introducing a wage limit we lock out millions of taxable funds and therefore the state will crumble. He forgets that the UK’s richest people have access to tax loopholes that the poorest do not, the poorest 5% of people paid more tax than the richest 5% in 2015. The Panama Paper’s also showed how the country’s richest are able to hide money overseas in Tax Havens.

He’s right to say that progressive taxation is a fundamental left wing value but if we are to be truly progressive we should be concentrating less on income tax, as it could be said to to reduce the incentive to work (or perhaps that it limits peoples aspiration to succeed) and more on taxing unearned income such as introducing a Land Value Tax, that would not only force wealthy owners of Land to pay a share of the profits made on it but it could also encourage a more productive use of that land and discourage dodgy practices like land banking.

Labour is building a progressive but credible economic plan, stopping bosses from earning obscene amounts of money at the expense of everyone else can be a key part of that plan.

Jack James

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