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....

Remember Luke 16, 19-31

The Rich Man and Lazarus
?There was a rich man who was dressed in purple and fine linen and lived in luxury every day.
At his gate was laid a beggar named Lazarus, covered with sores and longing to eat what fell from the rich man?s table. Even the dogs came and licked his sores.
?The time came when the beggar died and the angels carried him to Abraham?s side. The rich man also died and was buried.
In Hades, where he was in torment, he looked up and saw Abraham far away, with Lazarus by his side.
So he called to him, ?Father Abraham, have pity on me and send Lazarus to dip the tip of his finger in water and cool my tongue, because I am in agony in this fire.?

?But Abraham replied, ?Son, remember that in your lifetime you received your good things, while Lazarus received bad things, but now he is comforted here and you are in agony. 
 And besides all this, between us and you a great chasm has been set in place, so that those who want to go from here to you cannot, nor can anyone cross over from there to us.? 

  ?He answered, ?Then I beg you, father, send Lazarus to my family, 28 for I have five brothers. Let him warn them, so that they will not also come to this place of torment.? 

  ?Abraham replied, ?They have Moses and the Prophets; let them listen to them.? 

  ??No, father Abraham,? he said, ?but if someone from the dead goes to them, they will repent.? 

 ?He said to him, ?If they do not listen to Moses and the Prophets, they will not be convinced even if someone rises from the dead.??

If the 25% downed tools the others would starve. There needs to be less envy and more gratitude.

dont be stupid xenia what a ridiculous and arrogant post.

That really is unbelievably stupid, given that it's the poorest 75% who do the work growing the food. The top 25% just turn it into the sort of junk that makes us all fat and riddled with heart disease. I think, Xenia, you would find that if the 75% downed tools, the 25% would starve incredibly rapidly, along with most other people (probably sooner, given that they would be lynched if they all had your attitude).

The level of salary cap suggested in OP might not mean that people would starve, but it probably would mean people would die. Too many doctors would be caught by it - as if UK were to pay less than half what they would get elsewhere, then we'd see enough of an exodus to stymie NHS totally.

Entrepreneurs would seek other bases - so there would be fewer start ups. Small businesses would seek to move (or would the £320k apply to moving as well as selling assets). Families in SE would be ruined, as negative equity problems surge (you paid £400k for your rather less than average house? Well, you'll have to keep financing that, but you'll not be allowed to sell it other than at a loss: bye bye all your forward planning).

And bye bye private pension. Once you've allowed for employers contribution £320k is a moderate sized pot (which may have to be surrendered partly or entirely if you've already sold assets recently), thus reducing the amount of annuity you can purchase. A typical sized annuity is already down £2k per year. How much poorer do you want to make pensioners? Are they 25% of the population yet?

BTW: as they now give notional values to public section pension pots (which can be done either in terms of a scale of contribution, or in terms of how much you would need in the pot to buy the benefits on the open market) then the £320k cap could apply there too. It would make the changes under discussion now look trivial.

This issue isn't about harming bankers - they will leave and take their profits with them. Do think about who else would leave at the £80k salary cap, and what other harm would be done by £320k assets cap. The generation at the time of transfer would be utterly, utterly ruined.

Ah yes, it would hurt pubilc sector workers and their pension, this proposed cap too.

We had it in effect in my lifetime int he 70s whenthe top rate of tax was 99%. That was pay capping. My father on an NHS doctor salary was paying 66% as his highest rate of tax and then anotehr 15% on top of that so over 80% on any interest from building society savings. If so much of your pay is taken away there is little incentive to earn more and people move abroad as indeed they did in those years.

I can do the work I do from anywhere and I certainly would not stick around if all but £80k less tax were taken away. It is the clever and entrepreneurial people who are most mobile. If you look at immigration to the UK from abroad you will see that in many cases it is the bright best people from abroad (in many sectors, not all) who move here and do so well in the UK.

Which is merely another way of saying we are trapped with the status quo - and the status quo will not protect us from a future generation finding that the 75% can no longer expect the protection of unemployment benefit, state pension, free health care, free education, disability benefit, etc., just that it delays the day when that happens.

Xenia - did your father leave the UK and if not, why not?

My memory, being a doctor's daughter, of my childhood is that we led quite a charmed life and didn't suffer at all at the hands of high tax. We were all well fed, well clothed, well educated, well loved and well housed throughout the 1970s and beyond. I think doctors had to work harder then than they do now, though.

My father benefited from an excellent education courtesy of the state, and an excellent medical qualification, courtesy of the state. In return, he worked hard for what he got and took advantage of all opportunities he was given and ended up very successful. He went through medical school with a cohort of people who were all entirely privately educated. He viewed many of them as nice but dim. Accordingly, he didn't object to paying high levels of tax in the hope that the more intelligent and/or hard working would continue to receive a sufficient level of education and healthcare that they stood a chance over those born with a pre-existing advantage which they were not willing to give up. So, not all of the "fittest" see the logic in complaining about high tax per se, it's just a question of where and how the money is spent and how you deal with those not willing to join in with the spirit of the enterprise.

I don't think it's a case of saying that you have to stay with the status quo.

It's saying that 100% tax rates and asset value capping are going to make the situation worse not better.

I agree that 100% tax and asset value capping are likely to make the current situation worse. I strongly disagree with Xenia's attitude and self-justifications!

Off-topic, but interesting to see how many on this thread are children of doctors (I am too)

I went for doctors as an example as NHS pay scales are published, so I could be sure of the figures; and because it's an obvious example of a well remunerated profession where we clearly want the best here, but in which it is easy for British trained practitioners to move elsewhere so international salary levels cannot be ignored.

UK may be an island geographically, but it would be imprudent to try to act as an island with a unilateral swinging tax regime.

Sorry "swingeing" - I wasn't commenting on whether your childhood home had pampas grass!

The high tax rates didn't last long enough for him to leave although is brother emigrated. People always have. His uncles(3 of them) emigrated after the 1920s recession and some of my ancestors came to the UK because of teh irish potato famine. People have always moved across the globe. That movement is good for the gene pool too as we mix in more.

China in the cultural revolution tried to pay doctors the same as street sweepers and it failed. At the moment China is trying salary capping by the way in a big way - go and look at that. They want to keep making cheap goods so if you want to put wages up in some regions there you have to ask permission ()there has been huge wage inflation there recently) and the local officials are refusing for political reasons.