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July 30, 2014

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Posted: 30 Jul 2014 12:06 AM PDT

'Why Not Maximum Wages?'

Posted: 29 Jul 2014 03:39 PM PDT

Simon Wren-Lewis:

If minimum wages, why not maximum wages?: I was in a gathering of academics the other day, and we were discussing minimum wages. The debate moved on to increasing inequality, and the difficulty of doing anything about it. I said why not have a maximum wage? To say that the idea was greeted with incredulity would be an understatement. So you want to bring back price controls was once response. How could you possibly decide on what a maximum wage should be was another.
So why the asymmetry? Why is the idea of setting a maximum wage considered outlandish among economists?
The problem is clear enough. All the evidence, in the US and UK, points to the income of the top 1% rising much faster than the average. ...
So why not consider a maximum wage? One possibility is to cap top pay as some multiple of the lowest paid, as a recent Swiss referendum proposed. That referendum was quite draconian, suggesting a multiple of 12, yet it received a large measure of popular support (35% in favour, 65% against). The Swiss did vote to ban 'golden hellos and goodbyes'. One neat idea is to link the maximum wage to the minimum wage, which would give CEOs an incentive to argue for higher minimum wages! Note that these proposals would have no disincentive effect on the self-employed entrepreneur. 
If economists have examined these various possibilities, I have missed it. One possible reason why many economists seem to baulk at this idea is that it reminds them too much of the 'bad old days' of incomes policies and attempts by governments to fix 'fair wages'. But this is an overreaction, as a maximum wage would just be the counterpart to the minimum wage. I would be interested in any other thoughts about why the idea of a maximum wage seems not to be part of economists' Overton window.

Why the Rich Should Take the Lead Income Redistribution

Posted: 29 Jul 2014 07:42 AM PDT

I have a new column:

Why the Rich Should Call for Income Redistribution: After the craze over Thomas Piketty's Capital in the Twenty First Century, nobody should be surprised to learn that inequality has been increasing over the last several decades. The question is what to do about it.
One answer is to do nothing and hope the problem fixes itself, or to deny it is a problem at all. But that is a dangerous approach. - See more at:

One answer is to do nothing and hope the problem fixes itself, or to deny it is a problem at all. But that is a dangerous approach. ...

Is it Worth Spending to Make Workers Happy?

Posted: 29 Jul 2014 07:42 AM PDT

Me, at CBS MoneyWatch:

Is it worth spending to make workers happy?: Numerous studies have found a correlation between employee satisfaction and company success. Does this mean happy employees are also the most productive workers? Should firms spend money to make workers happier with their jobs?
Answering these questions is trickier than it might seem at first glance. ...

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