In his recent burst of activity, UK opposition leader Jeremy Corbyn has made several fairly controversial statements. Some I agree with him totally on (the crisis in the NHS due to underfunding), and others I disagree with him totally on (needing to keep the foreigns out). I would imagine my regular readers probably already know my positions on those issues.
The other idea he’s floated recently, though, is rather more interesting. I think he’s wrong about a maximum wage, but not for the right-wing reasons most commenters are trotting out.
Corbyn has said, simply, that there should be a cap on wages in order to reduce inequality — that he’d be in favour of an absolute maximum on what anyone could be paid.
Now, at first glance, I’m OK with this idea — no-one should have billions while there are people on the streets or starving. And I could eventually be persuaded to support a maximum wage, but only after other things have been tried first.
You see, most truly rich people *do not make their money from wages*. They don’t do a job, which they get paid for doing by an employer — or if they do, that doesn’t make up the source of most of their money. They make money, mostly, from already having money. From share dividends and share price rises, from rents on land or houses they own, from having “property” they own — usually as the result of legislation skewed their way, granting them monopolies on things that should be public goods. That money isn’t wages.
To use a simple, clear, example, since I’m listening to a Paul McCartney live album while I write this, we’ll take McCartney. He’s a very rich man — obscenely rich — but there are two very different ways he makes his money.
(There are probably dozens of ways, because the super-rich have all sorts of private arrangements, but these are a couple I know about).
The first way he makes his money is to go out and play concerts, where people pay a ticket price they think is worth it to see him play, and he does the job they’ve paid him to. That is, basically, a wage. He’s doing a job of work, and getting paid by the people who want him to do that job.
(It’s almost certainly more complex than that in terms of the legal arrangements around his tours, but you get the idea — in principle this is no different to a plumber coming round and fixing your washing machine).
The other way he makes his money is by owning a music publishing company that exploits the copyrights to thousands of songs, many of them by people dead for fifty years or more, which he had nothing to do with creating and to which he has a legal monopoly largely because of legislation influenced by other hugely rich people.
If a maximum wage were brought in, McCartney would presumably stop doing the concerts — which are an actual useful service to paying customers, which have some social value, and which are actual new work being done. But he wouldn’t stop collecting money every time anyone played “Rock-a-Bye Your Baby with a Dixie Melody” (a song written in 1918, by people who died between 1939 and 1959) or “That’ll Be The Day” (written sixty-one years ago by someone who died fifty-eight years ago) on the TV.
The same thing goes for capping executives’ pay. All a cap on executives’ pay would achieve is to leave companies with more money to go to shareholders, so the end result is to redistribute money from people who are doing *something* to people who are doing *nothing*.
Collecting money from “investments” such as shares and property is the ultimate in privilege in the most literal sense — private law — it’s only possible because of particular legal systems that have been created for the benefit of the rich, and is only accessible to the rich. It’s a way for the rich to get richer without working, a way for money to make more money and to widen inequality.
And currently, in the UK, that money is taxed under Capital Gains Tax — which is taxed at a *far* lower rate than income. We currently have a system that actively discourages working for a living in favour of just sitting back and taking money from other people — people who *do* have to work for a living.
Fundamentally, I think that people should be able to keep most of their income — if someone is doing an actual job of work, which other people are willing to pay them for, they’ve earned that money. They should have to pay as much in taxes as is necessary to fund public services, keep society going, and provide a decent safety net so the poorest can get by, and so on, and there’s a good argument that the amount they should be paying is much higher than it currently is. But fundamentally, when you’re a worker by hand or brain, you should keep the fruits of your labour.
But if you’re a rich person who inherited a few million from daddy, bought a load of houses cheap, and turned the few million into a few billion by jacking up the rents and inflating the property market… well, you haven’t earned anything at all, and all you’ve done is take away money other people have earned.
If we’re going to work on inequality, yes, it may well eventually be necessary to go after the merely very rich people who get paid huge amounts of money for their job. But I’d argue that that should *only* be done after going after the even richer people who get even huger amounts of money and do nothing for it.
Unless and until capital gains are taxed more than income — and at the top end taxed *far* more — a cap on income will tend to exacerbate, rather than to decrease, inequality. Cap capital gains — tax the 1% properly — and then we can talk about capping income if there’s still a problem.
As the song says, “why should we work hard and let the landlords take the best?”
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