Why don’t we have a maximum wage? Asking that question is another way of asking why some people can rake in millions while others struggle to earn enough to eat. A maximum wage might be one way to tamp down some of the massive inequality that exists around the world.

The political conditions for a cap on chief executive officer or hedge-fund manager earnings don’t currently exist, so admittedly this is a thought experiment. But why not? There are two ways of going about this idea: Either a flat cap or a ratio of the minimum wage.

Let’s try the first of those two ideas. If the most important job in a given country is the head of government, then that could be a reasonable cap. The salary of the United States president is US$400,000. So if the president is the most important job, nobody should receive pay that is equal or higher. That could be enforced simply: All salary above $399,999 is taxed at 100 percent with no deductions. If a company wants to give a multi-million dollar salary to an executive and that executive wants the cachet of earning such a sum, he or she doesn’t get to keep all that. Up to $399,999 is taxed at an appropriate rate, and all above that is taken in taxes. And, yes, let’s make that all compensation — salaries, bonuses, stock profits and “golden parachute” payouts.

Under this concept, far more taxes will be collected if companies wish to infer “status” on their leading executives by still providing pay well in excess of the cap, or companies will simply reduce executive compensation to the specified limit and have more money to spend on employees or to reduce the prices of their goods and services because they won’t have to hand out so much money in salaries. In the real world, it would be more likely companies would simply shovel more money into dividend payments and stock buybacks, so some sort of limit on those would have to be worked out. It wasn’t that long ago that stock buybacks were illegal in the U.S.

Let’s try this with more of the world’s advanced capitalist countries. The Canadian prime minister makes C$379,000 per year. The British prime minister is eligible to earn £172,153. The president of France makes €142,000. The German chancellor earns approximately €362,277 per year, one of the highest compensations for any political leader. The Australian prime minister’s annual salary is A$587,000. And for good measure, the European Commission president is scheduled to receive €323,652, higher than most heads of national governments.

It is safe to say that anyone earning close to the above salaries isn’t going to need to go dumpster-diving anytime soon. Surely enough to live comfortably.

How much can one person possibly spend?

Nonetheless, the idea of a maximum wage goes against the very concept of capitalism. The object of capitalism is for capitalists to accumulate more. A macabre race: How could any human being spend billions, tens of billions, of dollars/euros/pounds?

Before we delve further into the mind-boggling inequality, let’s play with the second idea above, that of establishing a maximum wage as a ratio of the minimum wage. Implementing this would surely mean a big raise for low-wage workers! The United States federal minimum wage is currently $7.25 per hour. For a 40-hour week that would be $290 per week or the grand sum of $15,080 for the year, assuming the full-time minimum-wage worker received vacation pay (or worked all 52 weeks of the year). A salary that would mean homelessness for anyone who had to survive on such a wage with no family support.

The Canadian federal minimum wage is $17.31 per hour. That would be $36,005 per year. For purposes of comparison, using the October 12 foreign-exchange rate of C$1=US73 cents, a Canadian working full-time for a year at the federal minimum wage would make the equivalent of US$26,145, or 73 percent more than his or her U.S. counterpart. (Some state and provincial minimum wages are higher.) The British minimum wage is £11.44 per hour. That adds up to an annual rate of £23,795, the equivalent of US$31,172 or about double his or her U.S. equivalent (calculated at the October 12 rate of £1=US$1.31).

If we were to establish a maximum wage as five or even 10 times the minimum wage, a lot of people would be taking a big cut in pay, especially in the U.S., where the minimum wage hasn’t been raised since 2009. That minimum wage has lost a third of its value in that time. So if some of those higher wages out there are to be preserved, the minimum wage would have to be greatly increased unless an extremely large ratio were selected under this scenario.

In the United States, home of inequality that stands out even by the standards of the Global North, chief executive officers were paid 290 times more than the average employee in 2023, according to an analysis by the Economic Policy Institute. To put those salaries in further perspective, the EPI reports that CEOs were paid nearly 10 times as much as the top 0.1% of U.S. wage earners in 2022. “Rising CEO pay does not reflect a rising value of skills or contributions to firms’ productivity,” the EPI said. “What has changed over the years is CEOs’ use of their power to set their own pay. In economic terms, this means that CEO compensation reflects substantial ‘rents’ (income in excess of actual productivity).”

We’re not talking about chump change here. The median pay of a chief executive officer at an S&P 500 company was $16.3 million in 2023. (The S&P 500 are among 500 of the biggest companies listed on U.S. stock exchanges.) Nine CEOs made more than $40 million last year, led by Hock E. Tan of Broadcom Inc., who “earned” $161,826,161.

Billions, not millions, for hedge-fund managers

Even these highest-earning chief executive officers are small potatoes next to the biggest earners among hedge-fund managers. The pay for the 25 hedge-fund managers who drew the highest compensation totaled US$26.085 billion for 2023, or an average of $1.043 billion per person. The median earner made $750 million. Topping this list, compiled by Institutional Investor, is Chris Hohn of TCI Fund Management, who “earned” $2.9 billion. Ten other managers made at least $1 billion.

These astounding totals are nothing new. For example, for 2014, when I last checked in with this annual compilation, hedge funds for the sixth consecutive year had fallen short of the average stock-market performance, returning for that year a composite average of three percent. Of the 25 hedge-fund managers who made the “Rich List” that year, 12 had returns below the 2014 average. Yet these 25 hedge-fund managers racked up a collective $11.6 billion that year — and that was considered an off-year. To return to 2023, the Dow Jones Industrial Average rose about 14 percent and the S&P 500 rose about 24 percent. We’ll cut the difference between the two more important U.S. stock-market benchmarks and declare that 19 percent represents the average gain. Did those 25 top “earners” do much better? In other words, these moguls must have earned somebody serious money to collect such enormous paychecks. In fact, that was not the case. Only six of the 25 beat that 19 percent average gain and one equaled it.

In other words, despite the hype these “masters of the universe” like to throw around, a random collection of stock picking would have done better than most of these 25 financial titans. But there is no admitting wrong in finance capital evidently. There is plenty of money to be made, as these compensations demonstrate, and of course there is always money to be thrown at financiers, such as the $10 trillion thrown at financiers in the first two years of the Covid-19 pandemic. That was money created by the central banks of five of the world’s biggest economies for the purpose of artificially propping up financial markets — and that total represents only one program of the many used by the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada. And the pandemic itself was a wonderful opportunity for the wealthiest. In just three months, from April to July 2020, the world’s billionaires added $2.2 trillion to their wealth. During the first seven months of 2020 alone, technology and health industry billionaires saw their wealth increase by about $150 billion.

Your pay of course is rather less than these gaudy figures and it hasn’t risen much. If you are lucky, you might have received raises to keep you even with inflation; many didn’t get even that. It is not as if you are not working hard. The St. Louis branch of the U.S. Federal Reserve, which maintains a useful database of economic statistics, reveals that labor productivity has nearly tripled since 1970 while wages increased only a little more than 50 percent. Even the St. Louis Fed admits, “Since the early 1970s, there’s been an apparent disconnect between labor productivity and real wages.”

Greed may be good for those at the top of the economic pyramid, but not for the rest of us. Apologists for this extraordinary inequality would like us to believe that this is somehow natural, but it isn’t. Capitalist markets are simply the aggregate interests of the most powerful financiers and industrialists, and those interests are diametrically opposed to the interests of the vast majority of humanity. It is long past time for class warfare to cease being a one-sided affair.

---