Risk of Unintended Consequences
At least to economists, the question of whether the minimum wage should be increased — and by a lot, as many on the political left advocate — is tricky.
In a perfect world, the higher the minimum wage — hell, all wages — the better: higher pay = more disposable income = better standard of living.
What’s not to like, right?
The catch is, companies must make a profit to stay in business, and labor represents one of the biggest expenses for most firms (still).
When government mandates that companies pay their workers more, Econ #101 says that businesses employ fewer workers.
Which can lead directly to the unintended consequence of a higher minimum wage hurting precisely the group it’s intended to help: low-skill and entry-level workers.
$10/hour vs. $100,000(!!)
Fortunately, at the other end of the economic spectrum (I won’t say “filthy rich”), no such ambiguity attends the case for setting what I’ll call a “maximum wage,” above which the marginal rate of taxation should be equally lofty.
Personally, I like the idea of setting the “maximum wage” at $100,000 an hour — which comes to a cool $200 million a year.
Precisely who (you ask) makes that kind of money?
According to Forbes, around 1,000 people last year.
Want to cast a bigger net?
Fine, make it $10,000 an hour ($20 million a year) — still a living wage for non-plutocrats.
Political differences aside, surely a majority of us believe that, when you make that kind of dough, a) things have gotten absurd; and b) you’re in a position to help those less fortunate.
Instead, thanks to what’s called the “carried interest” rule, many of the folks in that illustrious group — who, surprise, surprise, work in private equity on and near Wall Street — are taxed at the lower, capital gains rate rather than the higher rate levied on earned (salary) income.
See also, “Drug Dealers vs. Bankers: ‘Top 10’ Differences”; and “Private Equity ‘Sex, Lies & Videotape’ (Minus the Sex and Videotape), or, “Having Your Cake and Eating it, Too.”
