Recently, the CEO of Goldman Sachs got a bonus of over 50 million dollars. Why people need that much money baffles me, given the high levels of poverty in our world. If we imposed a salary cap on individuals (and a cap on corporate profits), assuming there's no constitutional barrier to doing so, would owners of companies have an incentive to pay their workers more? For instance, if we capped Donald Trump's salary and his corporation's profits, would he pay his lowest-wage earners more or would he simply lose the motivation to push his corporation to make money? Is it possible to convince capitalists to make more money not for their own profit, but to raise wages for low-income Americans?
2006-12-20 08:22:03 · 13 answers · asked by Gary S 1 in Social Science ➔ Economics
No, you'd likely see the partners of Goldman Sachs move to a more favorable country and provide them with jobs instead of Americans.
Why people think that they are "entitled" a job is beyond me.
2006-12-20 10:33:45 · answer #1 · answered by Anonymous · 1⤊ 0⤋
The incomes of the top 0.1% of the population has grown much over the last 20 years, but only a small fraction of them are CEO's. We hear about them because they are publicly traded companies and so their income is in the public domain. The congress in the early 90's tried to limit salaries to a million dollars for companies, which is why they now get their money in stock options.There is no practical way that the government can limit incomes of most high income people, except through very high marginal tax rates, As was pointed out in a previous answer, we had 90% rate from WWII until 1964, when the were dropped to 70%, and then further reduced in the 80's. The 20 year period after WWII, with a the 90% tax rat was one of the best in American history for economic growth and with the gains shared by all. There were many reasons for the growth during that time so I would not say the tax rate was the reason but am I not convinced that low marginal rates will promote growth. If taxes were increased there would be much income sheltered from taxes so it probably would not do as much as you would hope for.
2006-12-20 18:54:01 · answer #2 · answered by meg 7 · 0⤊ 0⤋
No.
Basically, we tried that for a bunch of years (before 1981). There literally was a 90+% income tax rate for such people. We also had a minimum wage that was pretty good - about the equal of $8 an hour in today's dollars.
When all of that was in place, we ended up with double-digit inflation (we'll have 1-2% for 2006), double-digit unemployment (right now it's 4.5%), and horrible returns on investments. The terms "stagflation" and "malaise" were used to describe our economy.
Low-wage people who had jobs did indeed make a bit more, but due to the high unemployment rate, the average Joe or Jane made less money than today.
I'd encourage you to take an econ class someday...
2006-12-20 16:33:10 · answer #3 · answered by geek49203 6 · 0⤊ 0⤋
No, this idea would actually end up hurting poor people.
Investors - not just the rich, even pension funds that manage the money of middle class workers - would be much more reluctant to provide capital to companies. The result would be a disastrous downturn in the economy that would severely limit the number of jobs available.
Another effect of this idea would be a huge increase in underground activity, as people and companies would find ways to compensate people who are very productive and perform well.
The last impact I will touch on would be the flight of our talented personnel overseas to work for comapnies without these restrictions. Why would the most productive citizens waste their labors here when they could just as easily work overseas to make more money.
The Goldman Sachs CEO got what his board thought he was worth. Have you seen how much profit Goldman turned this year?
2006-12-20 16:36:31 · answer #4 · answered by Time to Shrug, Atlas 6 · 1⤊ 0⤋
You are clueless as to how economics work. It is NOT a zero-sum model. Just because an executive gets a huge bonus, does not mean the employees on the lower end will get less. In fact, they will earn more if the decision-makers at the top have an incentive to increase corporate profitibility.
Look at Microsoft. The top dog is the richest man in the world, and NO ONE is complaining at the bottom end of their pay scale.
What you are proposing is another form of socialism, which fails everywhere it's tried.
2006-12-20 16:35:56 · answer #5 · answered by boonietech 5 · 2⤊ 0⤋
If the US imposed a salary cap, then it would no longer be the US. Let me ask you this: If the US had taken action to prevent Warren Buffet and Bill Gates from making as much money as they have, would they have been able to donate the tens of billions of dollars that they have spent to help solve the AIDS and malaria crises and other problems in the developing world? The USSR and Red China took from the wealthy and prohibited companies from taking profits from capital investment and 100's of millions of people died as a result. Capitalism can seem ugly and obscene but the alternatives are infinitely worse.
2006-12-20 16:31:44 · answer #6 · answered by redhotsillypepper 5 · 2⤊ 0⤋
No capping salaries would not help low income workers. Whenever artificial limits are placed on income, you disincentive creativity and effort. This in essence is a socialist system. "Low income" workers never thrive in such a system. They are oppressed. US is one of the few countries where people with "low incomes" own cars, cell phone, and televisions.
This idea comes from jealousy. Remember unless you are Bill Gates there is always someone with more money than you. Donald trump making less is not going to improve you life one bit.
2006-12-20 16:37:03 · answer #7 · answered by Jeffrey P 5 · 0⤊ 0⤋
Cant control compensation at the top let wall street, and investors determine compensation. Salary Cap on CEO is useless exercise we need to give more control to companies instead giving it to the goverment. Fair-Tax idea would be good idea people would have more money spend, and tax collection would increase and all people be better off. Is it better to have 200 to 3000 dollar wage gap, or 20,000 to 600,000,000 wage gap the oblivious is seen by most economists. Wage Caps reduce the incentive to take risks with money, and reduce the need to innovate in the markets, or in technology.
2006-12-20 19:34:32 · answer #8 · answered by ram456456 5 · 1⤊ 0⤋
no. why? the companies would just have more money. you know, the money they don't have to pay out to high earners. do you think they're going to pass back their extra money to the little guy? this isn't communism, dude. and here's the thing. everyone, and i mean EVERYBODY has the ability to seek out opportunity. if people want to advance their position, make more money, become successful then work at it. everyone has that responsibility to themselves and to the world to do everything they can do. everyone has potential. i don't buy that "some people have to be trash collectors" thing. no one has to end there. there will always be trash collectors, why? people can use that as a stepping stone on the road to success. come on people, lift yourselves. for your own good and the good of all. you've been given a life, work it. you don't like being a low-income american? then change it.
2006-12-20 16:35:30 · answer #9 · answered by practicalwizard 6 · 0⤊ 0⤋
I don't think so. A salary cap restricts overall compensation, but doesn't mean that it will be divided evenly or fairly, just won't be over a certain amount overall.
It could even fund other capital projects so they would invest instead of paying out.
2006-12-20 16:31:52 · answer #10 · answered by magicalmiguel 2 · 0⤊ 0⤋