Many wealthy people gainsay increases in the minimum wage. Others would sooner abandon it altogether. They suggest that establishing a floor on wages distorts “the market” and hurts small businesses, especially fast-food restaurants. One can comb the Internet searching for articles on the minimum wage, one of the most researched topics, and find oodles of opinions, along with facts and figures. (Here is one source for relevant papers.) Let’s just say that there is disagreement about the effects of a minimum wage, but that there is no clear evidence that it reduces employment. Indeed, some studies conclude that a higher minimum wage spurs economic growth and employment.
Now comes Matthew Yglesias arguing for a maximum wage. He writes:
A maximum wage would definitely help solve inequality: firms would spend less on bidding up the pay for the richest workers and that would free up more resources for middle-class salaries. And it is now a commonplace of progressive discourse to argue that executive compensation growth largely reflects rent-seeking that could be rolled back without impairing managerial talent. But there is actually some reason to believe that a maximum wage could improve growth outcomes and help up bring back some of the higher growth rates experienced before the late 1970s.
Yglesias cites a report by several economists.
The key reason for believing this might be possible comes to us from a paper by economists Benjamin Lockwood, Charles Nathanson, and Glen Weyl. They observe that not all jobs are created equal.
What Lockwood, Nathanson, and Weyl find is that by increasing the financial incentive for top talent to pursue careers in finance and law rather than teaching and research, the Reagan tax reforms reduced overall economic output while increasing the pre-tax share of income earned by top earners. In other words, rather than giving the middle class a smaller slice of a bigger pie and making everyone better off, these reforms gave the rich a larger slice of a smaller pie and made only them better off.
Bringing back the notion of a cap or near-cap on wages, in other words, could make the country more prosperous and make prosperity more broadly shared…
Hmmm. Sounds good to me.