Maximum wage
Encyclopedia
A maximum wage, also often called a wage ceiling, is a legal limit on how much income
an individual can earn. This is a related economic
concept that is complementary to the minimum wage
used currently by some states
to enforce minimum earnings. Both a maximum and minimum wage are methods by which wealth
can be redistributed within a society
.
Advocates argue that a maximum wage could limit the possibility for inflation
of a currency or economy
, similar to the way a minimum wage may limit deflation. If these hypotheses are true, implementing both pieces of legislation would achieve an economy with wages that cannot inflate or deflate past the point of the relative maximum/minimum wage (respectively). Accordingly, wages in the economy would hover between the maximum and minimum, and the populace would live between the two wage points. Supporters say a maximum wage could also reduce devaluation
of a currency
by limiting the amount any member of the populace can earn, and consequently effectively limiting the availability of currency. Economists of the dominant monetarism
view hold that this position is false; instead monetarists believe that inflation is controlled by growth in the money supply
according to the quantity theory of money
, rather than through growth in actual wages.
an individual
is permitted to maintain, while giving them unrestricted access to non-liquid asset
s. That is to say, an individual may earn as much as they like during a given time
period, but all earnings must be re-invested (spent) within an equivalent time period; all earnings not re-invested within this time period would be seized.
This policy is only arguably a valid maximum wage implementation, as it does not actually restrict the wage
s a person is allowed to maintain, but only restricts the amount of actual currency
they are allowed to hold at any given time. Proponents of the policy argue that it enforces the ideals of a maximum wage without restricting actual capital growth or economic incentive.
Proponents believe wealth that is not re-invested in the economy
is harmful to economic growth; that actual liquid currency not re-invested timely is indicative of an unfair trade
, in which an individual has paid more for a good
/service than the good/service was worth. This stems from the belief that currency should represent the actual value
of a good or service.
When this policy is imposed, individual savings can only be held as solid assets like stocks
, bonds
, business
, and property
. Opponents argue that since a maximum liquid wealth policy makes no allowance for individual savings, it therefore assumes the non-importance of a bank
and the loan
s that banks provide. Loans being essential to the economy, opponents argue, banks are an essential economic institution
. Proponents of the maximum liquid wealth policy respond that government
could be directly responsible for supplying loans to individuals; they also add that such an arrangement could result in vastly lower interest
rates. Of course, proponents of a conservative
(small) government would not find this situation ideal.
, to the amount of compensation
an individual is allowed, as a specific multiple of a company's lowest earner; or directly relative to the number of individuals a company employs and the average compensation provided to each individual employee, not including a certain percentage of the company's top earners. The former implementation has the advantage of limiting wage gaps. The latter implementation has the advantage of encouraging employment opportunities, as increasing employment
would be a way for employers to boost their maximum earnings. A compromise would be to base the limit upon the number of employees had by a specific company and the compensation of that company's lowest earner. One weakness in this method is that a company can simply hire outside firms to keep the low wage employees on their payroll, while only having the top earning employees on the companies payroll, effectively by-passing the limits.
To moderate self-employeed individuals, the maximum would be based on the average compensation of the nation's employed (GDP Per Capita) and a specific multiplier.
, upon the amount of compensation any individual is allowed to earn in a given time period.
announced that from January 2012 its public officials would be subject to salary limits, with different types of official positions subject to different maximum salaries. At the highest level, officials may receive salaries no higher than 12 times the minimum wage
. State governors, for example, may receive a maximum of 9 times the minimum wage. so this means maxium wage is low
ation that raises the rate at which the principal sum is taxed, directly relative to the amount of the principal. This type of tax
ation is normally applied to income tax
es, although other types of taxation can be scaled.
In the case of a maximum wage, a scaled tax would be applied so that the top earners in a society
would be taxed extremely large percentage
s of their income. Modern income tax systems, allowing salary
raises to be reflected by a raise in after tax income, tax each individual note of currency
in each particular bracket at the same rate. An example follows.
argue that such a policy would reduce incentive to innovate
and for highly skilled workers to pursue demanding jobs. This decline in innovation would be problematic as innovation is one source of economic growth.
Austrian economists and Libertarian
think-tank from the Mackinac Center for Public Policy
, argue that inflation is not caused by wages but by governments printing money. In addition, they highlight the fact money is a commodity whose value is subject to supply and demand. They argue likewise that the increased demand
for labour brought about by a maximum wage will prevent an economy running at its most effective because people will try to circumvent a situation where wages are kept below free-market levels.
in the 1960s. However, the policy was criticized and campaigners later had a "tax rebellion" and demanded the government reduce the top marginal taxes.
In his 2000 run for the Green Party presidential nomination, Jello Biafra
called for a maximum wage of $100,000 in the United States
, and the reduction of the income tax to zero for all income below that level. Biafra claimed he would increase taxes for the wealthy and reduce taxes for those in the lower and middle classes.
In England, the Statute of Artificers 1563 implemented statutes of compulsory labor and fixed maximum wage scales; Justices of the Peace could fix wages according "to the plenty or scarcity of the time".
To counteract the increase in prevailing wages due to scarcity of labor, American colonies in the 17th century created a ceiling wage and minimum hours of employment.
In the early Soviet Union
, in the period 1920–1932, communist party members were subject to a maximum wage, the partmaximum
. Its demise is seen as the onset of the rise of the nomenklatura
class of Soviet apparatchik
s. The idea that any individual could earn money by his labor, instead of earning for the community, undermined the initial, idealistic, principles of communism.
Association football in the United Kingdom had a maximum wage until January 1961, at which point it was abolished after Jimmy Hill
, chairman of the Professional Footballers' Association
, threatened strike action. Before then players earned a maximum of £20 a week, which was then around the average wage for a British worker. In justifying the strike action, one union representative stated that he "admired people in the mining community but it didn't mean they could cope with marking Stanley Matthews
on a Saturday afternoon." Johnny Haynes
became football's first £100-a-week player days afterwards the maximum wage was abolished, and ten years later George Best
was earning £1,000 a week.
alone they must stop working and allow someone else to work. This theoretical concept assumes there is a set amount of work to be done in an economy, and is not supported by any major form of modern economic thought. Attempts to reduce unemployment by removing people from the labor force, as is proposed by this theory, have been a failure.
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...
an individual can earn. This is a related economic
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
concept that is complementary to the minimum wage
Minimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
used currently by some states
State (polity)
A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
to enforce minimum earnings. Both a maximum and minimum wage are methods by which wealth
Wealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...
can be redistributed within a society
Society
A society, or a human society, is a group of people related to each other through persistent relations, or a large social grouping sharing the same geographical or virtual territory, subject to the same political authority and dominant cultural expectations...
.
Advocates argue that a maximum wage could limit the possibility for inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
of a currency or economy
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...
, similar to the way a minimum wage may limit deflation. If these hypotheses are true, implementing both pieces of legislation would achieve an economy with wages that cannot inflate or deflate past the point of the relative maximum/minimum wage (respectively). Accordingly, wages in the economy would hover between the maximum and minimum, and the populace would live between the two wage points. Supporters say a maximum wage could also reduce devaluation
Devaluation
Devaluation is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged....
of a currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
by limiting the amount any member of the populace can earn, and consequently effectively limiting the availability of currency. Economists of the dominant monetarism
Monetarism
Monetarism is a tendency in economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view within monetary economics that variation in the money supply has major influences on national output in the short run and the price level over...
view hold that this position is false; instead monetarists believe that inflation is controlled by growth in the money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
according to the quantity theory of money
Quantity theory of money
In monetary economics, the quantity theory of money is the theory that money supply has a direct, proportional relationship with the price level....
, rather than through growth in actual wages.
Implementation
No major economy has a direct earnings limit, though some economies do have highly progressive tax structures in the form of scaled taxation.Maximum liquid wealth
A maximum liquid wealth policy restricts the amount of liquid wealthWealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...
an individual
Individual
An individual is a person or any specific object or thing in a collection. Individuality is the state or quality of being an individual; a person separate from other persons and possessing his or her own needs, goals, and desires. Being self expressive...
is permitted to maintain, while giving them unrestricted access to non-liquid asset
Asset
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...
s. That is to say, an individual may earn as much as they like during a given time
Time
Time is a part of the measuring system used to sequence events, to compare the durations of events and the intervals between them, and to quantify rates of change such as the motions of objects....
period, but all earnings must be re-invested (spent) within an equivalent time period; all earnings not re-invested within this time period would be seized.
This policy is only arguably a valid maximum wage implementation, as it does not actually restrict the wage
Wage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
s a person is allowed to maintain, but only restricts the amount of actual currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
they are allowed to hold at any given time. Proponents of the policy argue that it enforces the ideals of a maximum wage without restricting actual capital growth or economic incentive.
Proponents believe wealth that is not re-invested in the economy
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
is harmful to economic growth; that actual liquid currency not re-invested timely is indicative of an unfair trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
, in which an individual has paid more for a good
Good (economics and accounting)
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used in the plural form—goods—to denote tangible commodities such as products and materials....
/service than the good/service was worth. This stems from the belief that currency should represent the actual value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...
of a good or service.
When this policy is imposed, individual savings can only be held as solid assets like stocks
Stocks
Stocks are devices used in the medieval and colonial American times as a form of physical punishment involving public humiliation. The stocks partially immobilized its victims and they were often exposed in a public place such as the site of a market to the scorn of those who passed by...
, bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
, business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
, and property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
. Opponents argue that since a maximum liquid wealth policy makes no allowance for individual savings, it therefore assumes the non-importance of a bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
and the loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s that banks provide. Loans being essential to the economy, opponents argue, banks are an essential economic institution
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...
. Proponents of the maximum liquid wealth policy respond that government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
could be directly responsible for supplying loans to individuals; they also add that such an arrangement could result in vastly lower interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
rates. Of course, proponents of a conservative
Conservatism
Conservatism is a political and social philosophy that promotes the maintenance of traditional institutions and supports, at the most, minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism...
(small) government would not find this situation ideal.
Relative earnings limit
A relative earnings limit is a limit imposed upon a businessBusiness
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
, to the amount of compensation
Remuneration
Remuneration is the total compensation that an employee receives in exchange for the service they perform for their employer. Typically, this consists of monetary rewards, also referred to as wage or salary...
an individual is allowed, as a specific multiple of a company's lowest earner; or directly relative to the number of individuals a company employs and the average compensation provided to each individual employee, not including a certain percentage of the company's top earners. The former implementation has the advantage of limiting wage gaps. The latter implementation has the advantage of encouraging employment opportunities, as increasing employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
would be a way for employers to boost their maximum earnings. A compromise would be to base the limit upon the number of employees had by a specific company and the compensation of that company's lowest earner. One weakness in this method is that a company can simply hire outside firms to keep the low wage employees on their payroll, while only having the top earning employees on the companies payroll, effectively by-passing the limits.
To moderate self-employeed individuals, the maximum would be based on the average compensation of the nation's employed (GDP Per Capita) and a specific multiplier.
Direct earnings limit
A direct earnings limit is a limit placed directly, usually as a number in terms of currencyCurrency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
, upon the amount of compensation any individual is allowed to earn in a given time period.
Public salary limit
In 2011 VenezuelaVenezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
announced that from January 2012 its public officials would be subject to salary limits, with different types of official positions subject to different maximum salaries. At the highest level, officials may receive salaries no higher than 12 times the minimum wage
Minimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
. State governors, for example, may receive a maximum of 9 times the minimum wage. so this means maxium wage is low
Scaled taxation
Scaled taxation is a method of progressive taxProgressive tax
A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate...
ation that raises the rate at which the principal sum is taxed, directly relative to the amount of the principal. This type of tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
ation is normally applied to income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
es, although other types of taxation can be scaled.
In the case of a maximum wage, a scaled tax would be applied so that the top earners in a society
Society
A society, or a human society, is a group of people related to each other through persistent relations, or a large social grouping sharing the same geographical or virtual territory, subject to the same political authority and dominant cultural expectations...
would be taxed extremely large percentage
Percentage
In mathematics, a percentage is a way of expressing a number as a fraction of 100 . It is often denoted using the percent sign, “%”, or the abbreviation “pct”. For example, 45% is equal to 45/100, or 0.45.Percentages are used to express how large/small one quantity is, relative to another quantity...
s of their income. Modern income tax systems, allowing salary
Salary
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis....
raises to be reflected by a raise in after tax income, tax each individual note of currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
in each particular bracket at the same rate. An example follows.
| Currency Bracket: | Dollars Taxed in Bracket: | Rate: | Taxes From Bracket: | After Tax Income: | Percentage of Income Kept: |
|---|---|---|---|---|---|
| $1 – $40,000 | $40,000 | 15% | $6,000 | $34,000 | 85% |
| $40,000 - $100,000 | $60,000 | 35% | $21,000 | $34,000 + $39,000 = $73,000 | 73% |
| $100,000 - $175,000 | $75,000 | 50% | $37,500 | $73,000 + $37,500 = $110,500 | 63% |
| $175, 000 - $250,000 | $75,000 | 60% | $45,000 | $110,500 + $30,000 = $140,500 | 56% |
| $250,000 - $500,000 | $250,000 | 75% | $187,500 | $140,500 + $62,000 = $203,000 | 40.6% |
| $500,000+ | $1+ | 90% | $0.90+ | More than $203,000 | Less than 40.6% |
Criticism of maximum wages
Critics of a maximum wage such as Milton FriedmanMilton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
argue that such a policy would reduce incentive to innovate
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
and for highly skilled workers to pursue demanding jobs. This decline in innovation would be problematic as innovation is one source of economic growth.
Austrian economists and Libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
think-tank from the Mackinac Center for Public Policy
Mackinac Center for Public Policy
The Mackinac Center for Public Policy is a free market think tank headquartered in Midland, Michigan. It is the USA’s largest state-based free market think tank...
, argue that inflation is not caused by wages but by governments printing money. In addition, they highlight the fact money is a commodity whose value is subject to supply and demand. They argue likewise that the increased demand
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...
for labour brought about by a maximum wage will prevent an economy running at its most effective because people will try to circumvent a situation where wages are kept below free-market levels.
History
A maximum wage has been imposed by some social democratic governments such as SwedenSweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
in the 1960s. However, the policy was criticized and campaigners later had a "tax rebellion" and demanded the government reduce the top marginal taxes.
In his 2000 run for the Green Party presidential nomination, Jello Biafra
Jello Biafra
Jello Biafra is an American musician, spoken word artist and leading figure of the Green Party of the United States. Biafra first gained attention as the lead singer and songwriter for San Francisco punk rock band Dead Kennedys...
called for a maximum wage of $100,000 in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, and the reduction of the income tax to zero for all income below that level. Biafra claimed he would increase taxes for the wealthy and reduce taxes for those in the lower and middle classes.
In England, the Statute of Artificers 1563 implemented statutes of compulsory labor and fixed maximum wage scales; Justices of the Peace could fix wages according "to the plenty or scarcity of the time".
To counteract the increase in prevailing wages due to scarcity of labor, American colonies in the 17th century created a ceiling wage and minimum hours of employment.
In the early Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
, in the period 1920–1932, communist party members were subject to a maximum wage, the partmaximum
Partmaximum
Partmaximum was a limit on the salary of a member of the Communist Party in the Soviet Union, a maximum wage. Partmaximum was introduced in 1920 by a decree of the All-Russian Central Executive Committee for all communists that held executive positions in Party, industry, government and Soviet...
. Its demise is seen as the onset of the rise of the nomenklatura
Nomenklatura
The nomenklatura were a category of people within the Soviet Union and other Eastern Bloc countries who held various key administrative positions in all spheres of those countries' activity: government, industry, agriculture, education, etc., whose positions were granted only with approval by the...
class of Soviet apparatchik
Apparatchik
Apparatchik is a Russian colloquial term for a full-time, professional functionary of the Communist Party or government; i.e., an agent of the governmental or party "apparat" that held any position of bureaucratic or political responsibility, with the exception of the higher ranks of management...
s. The idea that any individual could earn money by his labor, instead of earning for the community, undermined the initial, idealistic, principles of communism.
Association football in the United Kingdom had a maximum wage until January 1961, at which point it was abolished after Jimmy Hill
Jimmy Hill
James William Thomas "Jimmy" Hill OBE is an English association football personality. His career has taken in virtually every role in football, including player, union leader, coach, manager, director, chairman, television executive, presenter, analyst and match official.-Early life:Hill was born...
, chairman of the Professional Footballers' Association
Professional Footballers' Association
The Professional Footballers' Association is the trade union for professional footballers in England and Wales. The world's oldest professional sport trade union, it has 4,000 members....
, threatened strike action. Before then players earned a maximum of £20 a week, which was then around the average wage for a British worker. In justifying the strike action, one union representative stated that he "admired people in the mining community but it didn't mean they could cope with marking Stanley Matthews
Stanley Matthews
Sir Stanley Matthews, CBE was an English footballer. Often regarded as one of the greatest players of the English game, he is the only player to have been knighted while still playing, as well as being the first winner of both the European Footballer of the Year and the Football Writers'...
on a Saturday afternoon." Johnny Haynes
Johnny Haynes
John Norman "Johnny" Haynes was an English footballer, best known for his 18 years at Fulham. He played a club-record 658 games and scored 158 goals for the club between 1952 and 1970...
became football's first £100-a-week player days afterwards the maximum wage was abolished, and ten years later George Best
George Best
George Best was a professional footballer from Northern Ireland, who played for Manchester United and the Northern Ireland national team. He was a winger whose game combined pace, acceleration, balance, two-footedness, goalscoring and the ability to beat defenders...
was earning £1,000 a week.
Related concepts
Maximum Total Earnings legislation suggests that when a person has accumulated sufficient wealth that they can survive on the interestInterest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
alone they must stop working and allow someone else to work. This theoretical concept assumes there is a set amount of work to be done in an economy, and is not supported by any major form of modern economic thought. Attempts to reduce unemployment by removing people from the labor force, as is proposed by this theory, have been a failure.
See also
- Salary capSalary capIn professional sports, a salary cap is a cartel agreement between teams that places a limit on the amount of money that can be spent on player salaries. The limit exists as a per-player limit or a total limit for the team's roster, or both...
- Minimum wageMinimum wageA minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
- PartmaximumPartmaximumPartmaximum was a limit on the salary of a member of the Communist Party in the Soviet Union, a maximum wage. Partmaximum was introduced in 1920 by a decree of the All-Russian Central Executive Committee for all communists that held executive positions in Party, industry, government and Soviet...
- Gini coefficientGini coefficientThe Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" ....
- Welfare economicsWelfare economicsWelfare economics is a branch of economics that uses microeconomic techniques to evaluate economic well-being, especially relative to competitive general equilibrium within an economy as to economic efficiency and the resulting income distribution associated with it...
- Income inequality metricsIncome inequality metricsThe concept of inequality is distinct from that of poverty and fairness. Income inequality metrics or income distribution metrics are used by social scientists to measure the distribution of income, and economic inequality among the participants in a particular economy, such as that of a specific...
- Social welfare
External links
- TaxAlmanac - Online tax collaboration A wiki created by tax professionals with detailed information on US IRS Tax Law and the only known free up to date copy of the US Internal Revenue Code.
- CAPitALLism.org - An online resource for creative maximum wage implementation
- A simple microeconomic explanation of wages, skill, and utility
- Would a maximum wage make life better? - An editorial explores pros and cons of a maximum wage