Several years ago I listened to an interview on CBC radio with a Buddhist monk from Bhutan. He made an amusing and accurate statement linking happiness and excess. To paraphrase his comment he said, ‘Everything in moderation except moderation, which should be done to excess.’
The point of excess is a good one and we should hope that the COVID-19 pandemic will encourage us to look at this excess in our own community, province, country and world. Many Canadians have found ourselves thrust into unemployment and reliant on federal and provincial benefits. We are also being introduced into how the economy is stratified and full of insecurity for many. This insecurity provides the opportunity to focus on ideas like a basic income, affordable housing and food security.
We will have to find ways to pay for the benefits that are being used right now to get us through these surreal times. It is time to take up an idea that has been around for more than 100 years – the idea of a maximum wage. The basic principle is simple. Establishing a maximum wage incentivizes a distribution of income where it is produced, principally by workers, and disincentivizes grotesque incomes through taxation.
A maximum wage can be linked to the minimum wage and would require policy makers to have a discussion about wages at both ends of the spectrum. Too often a discussion on wages is fixated solely on minimum wage. Those who would slow down increases to minimum wage focus on the perception of economic hardship on businesses. Proponents of increases to minimum wage can often highlight the economic benefit for all by lifting workers out of poverty or income insecurity.
Maximum wage legislation would work differently than minimum wage legislation but still encourage robust discussion of the economic benefits (or lack thereof) of excessive wages.
For argument’s sake, let’s say that a maximum wage is set at 25 times that of minimum wage. The current average minimum wage across Canada is approximately $12.65/hour, slightly less than that of PEI which is $12.85. In the above scenario, the maximum wage would be $316.25 per hour. For a 40 hour work week over the entire year, this translates into $657,000/yr. Once someone hits that income threshold, the tax rate could be 90-95% for all earnings over that amount. Just to be clear $657,800 is slightly less than $55,500 per month. Contrast this with the minimum wage of slightly under $2,200/month or $26,000/yr.
An applied example is CEO compensation. In 2018 the CEOs of the top Canadian banks earned a total of $63,200,000 among them. Collectively their maximum income is $3,289,000 (taxed at regular rates) and the excess of $59,911,000 would be taxed at 92.5%. This latter amount would generate $55,417,675 in tax revenue. In turn, it would leave $4,493,325 to divide up among themselves or approximately $900,000 each.
COVID-19 had demonstrated how much we can do collectively when we put our mind to it. The pandemic can be the start of doing things differently with a focus on the common good.