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A maximum wage, also often called a wage ceiling, is a legal limit on how much income an individual can earn. It is a prescribed limitation which can be used to effect change in an economics structure.
A vote to implement a maximum wage law in Switzerland failed with only a 34.7% vote for approval.
This policy is only arguably a valid maximum wage implementation, as it does not actually restrict the 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 liquidity 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 , 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 that banks provide. Loans being essential to the economy, opponents argue, banks are an essential economic economic system. 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.
A weakness in this method is that a company can simply hire outside firms to keep low wage employees off their payroll, while only having the top earning employees on the company's payroll, effectively bypassing the limits. However, the hiring of external employees will come at a higher total cost and will reduce company profits, something against which executives are often measured and compensated.
To moderate self-employed individuals, the maximum could be based on the average compensation of the nation's employed (GDP per capita) and a specific multiplier. As the number of self-employed individuals with no employees and who earn an excessive amount of money would be extremely limited, such a measure is unlikely to be implemented.
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 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.
| + Example Calculated amounts shown for top of bracket. Any currency may be substituted for dollars. !Tax bracket !! Width of bracket !! Marginal tax rate !! Tax paid on bracket !! Accumulated after-tax income !! Effective tax rate (rounded) |
| 15.00% |
| 27.00% |
| 36.86% |
| 43.80% |
| 59.40% |
| Over 59.40% |
In England, the Statute of Labourers 1351 prohibited anyone of working age who did not have enough land to support themselves from demanding, or employers from offering, wages higher than were typical for those of their station in 1346, and required them to work on pain of fines, during an economic depression caused by the Hundred Years' War. It was a major cause of the Peasants' Revolt in 1381. Later, 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 . The idea that any individual could earn money by their labor, instead of earning for the community, undermined the initial principles of communism.
In 1933, Washington State Representative Wesley Lloyd proposed an amendment to the U.S. Constitution that would have limited annual incomes to $1 million. His contemporary colleague John Snyder introduced a companion amendment that would have limited personal wealth to $1 million. Neither proposed amendment, however, received enough votes to begin the ratification process.
In 1942, during World War II, US President Franklin D. Roosevelt proposed a maximum income of $25,000 ($ in dollars) during the war:
This was proposed to be implemented by a 100% marginal tax on all income over $40,000 (after-tax income of $25,000). While this was not implemented, the Revenue Act of 1942 implemented an 88% marginal tax rate on income over $200,000, together with a 5% "Victory Tax" with post-war credits, hence temporarily yielding a 93% top tax rate (though 5% was subsequently returned in credits).
After decades of social democratic governments, the Swedish children's author Astrid Lindgren faced an infamous marginal tax rate of 102% in 1976, in effect creating a wage ceiling. Though the example was partly due to inverted loop holes in the tax code, the figure was seen as an important catalyst for the results in the election that year, in which the Social Democratic Party lost power after having led the country for 40 consecutive years. Later a "tax rebellion" demanded the top marginal tax rates were reduced to 50% in the late 1980s.
Since the 1990s, the chief proponent of a maximum wage in the United States has been Sam Pizzigati; see References, particularly .
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. Many Green parties have a maximum wage in their manifesto, which they argue would prevent conspicuous consumption and the subsequent environmental damage that they believe ensues, while allowing the financing of jobs and a guaranteed minimum income for the poorest workers.
In his campaign for the French presidency in 2012, Jean-Luc Mélenchon argued in favour of a tax rate of 100% on incomes over Euro360,000.
By the summer of 1928, players could earn a weekly maximum of £8 (equivalent to £ in ), although clubs routinely found ways to increase this.John McManus, ‘McGrory, James Edward Jimmy (1904–1982)’, Oxford Dictionary of National Biography, Oxford University Press, 2004; online edn, Jan 2010 Arsenal player Eddie Hapgood supplemented his income by fashion modelling and advertising chocolate.Jeffrey Hill, ‘Hapgood, Edris Albert Eddie (1908–1973)’, Oxford Dictionary of National Biography, Oxford University Press, 2004
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