The Case For A Maximum Wage by Sam Pizzigati

The Blurb On The Back:

Modern societies set limits, on everything from how fast motorists can drive to how much waste factory owners can dump in our rivers. But incomes in our deeply unequal world have no limits. Could capping top incomes tackle rising inequality more effectively than conventional approaches?

In this engaging book, leading analyst Sam Pizzigati details how egalitarians worldwide are demonstrating that a “maximum wage” could be both economically viable and politically practical. He shows how, building on local initiatives, governments could use their tax systems to enforce fair income ratios across the board.

The ultimate goal? That ought to be, Pizzigati argues, a world without a super rich. He explains why we need to create that world – and how we could speed its creation. 

The Review (Cut For Spoilers):

Sam Pizzigati is an Associate Fellow at the Institute for Policy Studies in Washington DC and in this fascinating book he examines whether a maximum wage would help to reduce inequality within society, what a maximum wage would entail and how it could be implemented. I wasn’t convinced that his ideas would gain political momentum to become law but there’s plenty of food for thought here if you’re interested in the topic.

Pizzigati examines the historical reasons for the gap between senior executive pay as compared with the average employee pay rate, mainly because of successive administration’s lowering of the top tax bracket in response to campaigns from the rich.   Although the figures are – perhaps obviously – US centric, the general arguments could be applied to any number of other western countries, including the UK and it is truly shocking to learn that in 2015, the top 0.01% of America’s population earned nearly 2100 times more than the average American wage.

Also depressing are the figures that show how large companies are often awash with cash that they don’t know what to do with while real wages are lowering and yet there is no incentive on companies to increase pay to their workers because to do so would be to decrease their profits. It’s no coincidence that Trump’s 2017 tax bill has seen increased returns to corporate shareholders and yet made no significant difference to the pay that their employees receive (a couple of PR-related one-off bonuses notwithstanding). And by increasing returns to shareholders C-suite executives justify their own, every-increasing pay-days.

I was interested in Pizzigati suggestion that governments intervene in this by denying tax breaks or public sector contracts crucial to many multinationals where the executive pay grossly exceeds that paid to the lowest paid workers. Given how dependent corporates are on government subsidies of one sort or another (see Amazon’s forum shopping for tax breaks in return for its new key office in the US, where it forces cities to compete with each other for the honour of bring low paid work and gentrification to force other workers out of the local housing markets) but given the enthusiasm with which certain public bodies rush to give those breaks, I have to question to what extent it could be practical in the long run.

Pizzigati goes on to examine ways of redistributing wealth, taking on board Thomas Piketty’s argument that we are returning to “patrimonial capitalism” and noting the difficulties inherent in Piketty’s suggestion of a global wealth tax of 5%, given the use of tax havens to stash away wealth from prying eyes and the lack of international consensus and cooperation when it comes to taxation.

His comments on the adverse effects that the super-rich have on the economy and society are thought-provoking, particularly through the rise in luxury goods and the fact that the super-rich both drive up prices while sucking out vitality, notably through property purchases as they move into and “gentrify” areas, forcing out those who made a locale cool and interesting to begin with. His analysis of super-rich philanthropy is particularly damning when he considers the amounts donated by the super-rich as compared with the amounts they could be paying through taxation (the effect of which still wouldn’t diminish their wealth by a significant level) and he rightly points out that many donations are made for hubristic purposes that do nothing to improve the infrastructure that the rest of the population requires.

Where Pizzigati left me unconvinced was in his suggestions for how the wealth and income of the super-rich could be tackled and redistributed. Although he points out the difficulties in introducing and enforcing wealth taxes, inheritance taxes and citizenship taxes (such as that used by the USA to capture income of American passport holders wherever they live in the world) I was not convinced by his assertion that a maximum wage could be used to supplement and frame the same mainly because there just isn’t the political demand for it because although people may be angry at income disparity, they also worry about being hit by measures they want to see deployed against other people. This is mainly because of the huge power that the super-rich hold over the political establishment through campaign donations, ensuring that they can keep things the way they are, if not improve their own position still further (again, see the Trump regime, which is now looking to go after the Dodd-Franks legislation).

That aside, I do think that this is a very interesting read and is one that will appeal to anyone interested in looking at ways to tackle pay inequality and for that reason is well worth a look.

THE CASE FOR A MAXIMUM WAGE was released in the United Kingdom on 4th May 2018. Thanks to the Amazon Vine Programme for the review copy of this book.

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