Should the Australia have a universal maximum wage? Would it help develop the society and not hinder economic growth? I think so.
At the moment, the Gini coefficient of Australia is around 35% (0 is perfect income equality) and while some might consider this low(the USA is at 41.1%) there is certainly room for improvement. This in equality causes real problems too, and can lead to lower standards of living for many people. There are meany theories out there on how to lower income inequality in Australia and other parts of the world. The most popular approach is to tax the rich and redistribute their income and while this is certainly easy to say, it has certain problems in the doing aspect.
Another idea is to simply limit the income of CEOs and Executives to the wage of his or her least well payed worker. For example, lets say a CEO can’t earn more than 20 the least well payed employee the CEO of Hungry Jacks would not be able to earn more than $700,000 a year. Still a sizable living, but far off the millions he earns today.
This would have a two fold effect. Not only would it insentience big businesses to pay their employees well, it would also limit the massive accumulation of wealth by Australia’s best off.
The practical way to enforce the policy is to require companies to publish their pay ratios, between what the boss is getting and what the worst off employee receives. The publication of these ratios will put pressure on firms to explain and justify the pay gap. This way it would be impossible for a company to hide the pay discrepancies.
Now of course it is time for an argument. There are those who will say that without exuberant pay, these people won’t be motivated to work or that paying them massive salaries somehow grows the economy and provides investment for new businesses. $700,000+ is simply not enough for these hard working entrepreneurs, they will say, if they don’t get this money, the economy will surly shrivel up from lack of investment. The lazy poor people wont be able to get any money at all because they will all be out of a job.
Now I’m not here to argue economics 101 with these kinds of people but they do highlight the plight of ever enforcing such a policy. The rich simply have to much to lose if such a policy is ever enforced. The lobbying power they they can wield world be far to great to contend with. This is the reason why it will never be enforced. Lets go back to the CEO of Hungry Jacks, Atul Sharma. He only has $1.7 billion to name. Lets say he would make $1 billion in the rest of his life, but only $300,000,000 with this law. That means he can spend 6 hundred million on lawyers, donations and lobbying and still make a profit. Times this by all the millionaires in Australia and you can see why a law like this is doomed…