When is enough enough? The question of a maximum wage

Labour rights article written on the 15 Mar 2012

A living wage is increasingly acknowledged as  a fundamental right for workers throughout the world. But in a world of finite resources and slowing economic growth, the question remains of what might need to change to allow low-waged workers to obtain a fairer share of pie. Many believe that the answer may lie in examining the opposite spectrum of the pay scale.

In Australia, executive pay has grown by 250 per cent in real terms since 1993 while the average Australian worker would have to be employed for almost 100 years to earn a CEO’ annual pay packet. In the context of global supply chains that span across national borders, wage inequity is even more pronounced. A recent Trade Union Congress study found that it would take Sri Lankan workers making products for Nike 14,000 years to earn the annual remuneration package of the company’s CEO.

Yet recent studies by the UK High Pay Commission and economic analysts in Australia have called into question the legitimacy of huge salary packages and bonus schemes for CEO’s and executives. These studies indicate that the exponential growth in executive salaries has had little impact on company performance – and in some cases has even been detrimental.

This situation raises the question of whether there is a need for a maximum wage to ensure executive salaries are more proportional to the wages of other employees and that workers at the lowest levels of companies and supply chains are allocated a fairer share.

The Pay Watch Report, prepared by the Australian Council of Trade Unions (ACTU), recommends that rewards for high company performance should be passed on to all employees who have contributed and not only the executives. It also calls for increased shareholder control over wage setting, higher taxation for companies that pay salaries in excess of $1 million, and for executive salaries to be capped at 10 times the average wage.

Those against the idea of a wage cap argue that it is an extreme response to the wealth inequality issue and that it extends government control of the market in a manner out of sync with the modern global economy.

So what’s your take on the maximum wage debate?  Have your say by leaving a comment below.

Read the UK High Pay Commission report
Read the New Internationalist maximum wage debate
Read the ACTU Pay Watch Report