What would the economic implications of salary capping be?

[Whirliwig72]

Just musing as I dole out fish fingers and smiley faces to my son... If a law were to be brought in making it impossible to earn more than a set amount (say £80k pa) and illegal to sell an asset for more than 4 x times this amount what would the implications be on society? Would it create more or less employment? ... Would people be less motivated to work hard?... Would it make people happier?... Create a more utopian society? Please give me your thoughts....

Urrgghh. If America is the heart of capitalism and is more regulated than we are, yet is the main cause of the current global chaos, then regulation apparently isn't the answer.

So, lots of doctors, teachers and engineers are leaving the UK. In response, the government attacks teachers' pay and pensions and seeks to alter the NHS in ways the majority of the medical profession now appear to be opposing. Oh, and does nothing to improve things for the industries that employ engineers, instead focusing on keeping the financial sector happy in case bankers decide to leave.

Do you think the answer is more of New Labour's 'light-touch regulation'? Even Gordon Brown admitted that he should not have listened so much to the bankers who wanted the 'light-touch regulation' he gave them.

The powerful people and powerful lobbyists became too strong and influential, and there were some 'politicians and also some 'cabs for hire' who were overly influenced by these lobbyists. Some of teh checks and balances were scrapped under a policy of deregulation of the financial markets which Thatcher started and which was continued by successive politicians. But it wasn't inevitable, it wasn't always so, and an alternative of effective regulation exists.

It is not true that what bankers do is so clever that mere mortals can't understand it and regulate it. Our scientists working in CERN and in our universities are far cleverer than our bankers and getting to grips with their financial instruments and their regulation is peanuts to our brainy graduates. We need a policy of effective independent regulation. It is not true that we will all be doomed and the bankers will leave the country if we don't give them 'light-touch regulation'. Let's regulate them, hold them liable and create some nationalised banks to give them some competition.

It's about people and power. We have the people, we have the human capital in our universities and the government of the people has the power.

As the article was from early 2008, it's clear that professionals were unhappy with their prospects under a Labour government even before austerity measures were even a possibility. Doctors are notoriously well-rewarded within the NHS. Teachers are never happy whoever is in charge. And engineers are not necessarily public sector workers in the first place. :)

Let's create more dctors, let's train more of them, let's increase the number of places in medical schools. Let's create more competition, that will reduce the amount they earn. There is no need for us to import foreign doctors from countries where they are needed most, we could train more of our own. A greater supply of labour will reduce their wages. It's the same with dentists.

So, are you saying these people aren't leaving the UK any more, then, Cogito?... Or that they would be leaving it, anyway, because they are never happy?

What I'm saying is that the article guesses the reasons for professionals leaving the country in 2008 as high house prices, high taxes and poor climate. Reasonable to add 'better wage prospects' and 'more opportunities' to that. Austerity measures will have increased the flow of emigrants, although the weakness of the global economy may have offset some of that. What is clear, however, is that capping wages would not be an incentive for them to stay home.

It is not the super rich that are leaving. Millionaires like Osborne etc. don't leave and Rusian oligarchs come here.

It is ordinary people who leave. Listen to radio phone-ins and you will see that cab drivers, farmers, nurses and scientists talk of moving to Canada or Australia for a better life. They say the country is going to hell in a handcart, that political correctness has gorn mad, that they are too highly taxed and too poorly paid and that they struggle to make a good living here with ever increasing house prices and stealth taxes and red tape that restricts their enterprise and growth.

Oligarchs don't struggle, they choose to set up home here. The tax regimes don't seem to affect them.

It is ordinary people who are buckling under the strain, the squeezed middle, the ever-shafted middle.

We all started in Africa and mankind has emigrated ever since. It is how it is. Things go in cycles. I had great uncles who emigrated in the 20s after the great crash. Things were even worse here then than they are now. People didn't have much food nor shoes. There will always be cycles in both markets and in terms of which economies on the planet are in the ascendancy. I don't think the fact people might want to move to other countries means capitalism and free markets don't work.

However we certainly could do with cutting back state provision hugely. increasing the band of people who pay no tax and reducing taxes all round. If that causes people to move to Angola or wherever because state benefits are better there then so be it.

And it those people who voted against Labour in the hope that they would no longer be squeezed. It is those people who are against salary caps and against restrictions and for freedom, unlike the bien-pensants in Islington and Primrose Hill who read the Guardian in their midllion pound homes and are not part of the squeezed middle and have the luxury to priortise issues like sustainability and saving the planet, while the ordinary people are trying to save their jobs.

It's funny how you talk about both needing more regulation and having too much red tape. How will you separate out those businesses in need of more regulation from those in need of less red tape? And how will you stop some of those now held back by red tape from adopting the sorts of unscrupulous business strategies of which most of us disapprove if some of that red tape is removed? It's not as if most people haven't suffered at the hands of unscrupulous small businesses, whether that be plumbers, carpenters, electricians, builders, independent shops, etc, etc... Lots of people go to big businesses instead because, ironically, they feel better protected going to big business, even if in the long term they are more shafted by it. And that's because big business can cope better with regulation.

I believe in regulation. I am against MPs flipping their homes. But the regulation must not stifle small business and enterprise, it must incentivise productivity, profit and business. John Redwood is the expert on cutting out regulation that stifles enterprise.

I am against ripoff cowboy builders and dodgy traders, but Redwood and the Tories have identified lots of regulation that stifles productive businesses.

We need regulation to ensure a free and fair market and to stop reckless risks which crash the economy, but we don't need the type of elf and safety regulation that prevents emergency services rescuing or helping people

www.dailymail.co.uk/news/article-2007246/Elf-n-safety-red-tape-prevents-half-police-quarters-paramedics-helping-public.html

employers would surely struggle to fill some jobs. why would you take a job that was very demanding and had previously had 100k + salary if you could take a much less demanding job that paid the same - ie 80k? my husband earns 100k + as a consultant - usually because companies can't get permanent employees to do what he does. there's no way he would do this role for 80k as it involves lots of stress and living away from home. he would take a local job instead. so the companies would struggle even more to fill specialist technical positions and projects would be lost as a result.

Thta is exactly why communist countries are not as innovative and productive as capitalist countries. Why bother busting a gut if there is no incentive and you earn the same as an unskilled worker?

Communist countries came up with a few scientific innovations when they were busy competing with capitalist countries. And are we now saying that China is not Communist? In which case, surely you can argue that there hasn't actually been a proper communist country, yet? It's not as if the name means anything if the practice is actually contrary to the principle, is it? A bit like New Labour being assumed to be left wing, just because it has the word "Labour" in it.

'And that's because big business can cope better with regulation.'

Exactly. It is sometimes the case that big business lobbyists persuade regulators to impose green type regulations on small businesse which harm the competitiveness of small business and favour big business with its big pockets.

Of course China is not communist. Communism is a common con. It is about power and the decption of the proletariat by a small ruling elite.

All systems are about power and who gets it. All systems are therefore a con, because they all claim to give more people more power than the other systems do (apart from religion, which is just abused by power seeking people claiming they are closer to God than everyone else).

But some systems are better than others. It's a matter of degree. The overriding factor is liberty and freedom from tyranny. There is no heaven on earth, but free democratic capitalist countries are further from hell than communist tyrannies.

Now, that's a more helpful argument. No system is perfect, so people should stop accusing those who want to question the status quo of being entirely anti all capitalist principles. It isn't a choice between communism and capitalism, since there isn't a single country in the world that has ever had a pure form of either.

i wonder if it would have any implication for taxation levels? The tax people would have paid on the money over 80k would still need to come from somewhere, so i wonder if the tax rates would have to rise?

rabbitstew, you are right - no system is perfect, and a system that had 'light-touch regulation' that allowed bankers to take unchecked risks that led to collapse and huge public bailouts is certainly not perfect. We need to correct teh system, introduce much better targetted regulation to prevent this happening again and the deregulation of teh financial markets needs to revised.

But all of our systems work on a form of capitalism. Socialists in western countries also subscribe to the capitalist economic system with stock markets etc. We need to regulate and reform capitalism. But socialists who argue that we need to scrap capitalism will lead us to the slavery of the Soviet Socialist Republics.

Tax isn't a bad thing if the money is wisely spent - even tax at relatively high levels. I appreciate the roads and cleansing services and hospitals and schools that tax money provides. I would not like to return to the days when education was only provided to those who could afford it and to a minority who appealed to small charities. Those who want to minimise tax seem to be excessively confident that we won't one day end up back in the situation where the poor could actually starve or freeze to death, or die of easily treatable diseases.

I think for most people, the argument is over how to help and support the weak without encouraging the lazy and selfish; and how to encourage the ambitious without encouraging the excessively ruthless. And how to make those people in society who perform essential, but essentially unprofitable activities, feel valued, respected and appreciated. How you would go about getting the balance right is not a science, it's an art.