In the apocryphal version, F Scott Fitzgerald told Ernest Hemingway that “the rich are different from you and me”, to which Hemingway replied: “Yes, they have more money.” It has the merit of being a funnier version, but Fitzgerald’s aperçu actually comes from a short story called The Rich Boy, with the lines: “Let me tell you about the very rich. They are different from you and me.”
That “very” is a distinction many of us have trouble with, for understandable reasons. It’s easy to think of the rich as anyone richer than you, and seems to be quite difficult for people who are well off to regard themselves as rich.
It’s hard to get up-to-date or precise figures, because they tend to be based either on income tax or on salaried workers (so they’re more accurate for earnings than wealth) but the Scottish Government lists median weekly earnings as £470. That’s the highest anywhere in the UK outside London and the south-east, but a bit lower than the English overall average. I doubt that many think of it as rich, though.
Going by the latest UK percentile list (for 2018); the middle point is about £24,000 a year, £52,000 puts you in the top 10 per cent, and anyone on more than £70,000 is in the top five per cent. Just as they never seem to know how much a pint of milk costs, it’s remarkable how many politicians – of all parties – seem unaware of these figures.
Five years ago, Jeremy Corbyn, whose entire political career, according to him, was devoted to eradicating inequality, told this newspaper that he favoured a maximum wage. He later clarified that he would pitch it only at the very rich, at a level quite a bit higher than his own salary. At the time, that was £138,000: £30,000 more than the amount then needed to be in the top one per cent.
You can’t keep a bad idea down. Mr Corbyn may have disappeared back to his natural habitat – addressing fringe meetings run by front groups for Trotskyites – but the maximum wage is back again, this time touted by the High Pay Centre and Autonomy, outfits that seem to be opposed to their own names. It was backed by a poll suggesting that a majority of people like the idea, and fewer than one in three actively oppose it. The same survey suggested that they would pitch this cap on pay at £100,000.
Now, like you, I think £100,000 is quite a lot of money. I also agree with you that Premier League footballers and film stars are paid far too much. I, too, would be delighted if Sir Richard Branson and Sir Philip Green got paid less while nurses and firefighters (I pick these saintly professions to occupy the moral high ground, and to make my opponents seem horrible people) were paid more. But that’s not what a maximum wage is proposing.
It’s not even the sort of economic illiteracy that thinks there’s a fixed amount of money in the world, and that for anyone to get more of it, someone else must have less. Or that Jeff Bezos actually has $185 billion in crumpled readies, and could easily give it away and cure world poverty. Even if it weren’t nominal stock value, so that cashing it in would bankrupt Amazon, put hundreds of thousands out of work, drive prices up for consumers and make the money evaporate, it would give the rest of us about $23 each.
It’s stupider than that. A pay cap – unlike, say, a huge tax on earnings over £100,000 – wouldn’t bring any money into the Treasury, so it’s not even a redistributive move. Giant, very rich corporations would presumably just save a bit on employing their CEOs, and pocket it, just as Gordon Brown’s insane tax credits system subsidised firms and undermined real wages, by topping up their lowest-earning employees’ salaries with taxpayers’ money.
In practice, the very rich would demand dividends or some form of recompense other than a salary, as many of them already do, with the additional benefit that such moves tend to enable them to reduce their tax liability.
There’s always a discussion about whether really rich people would move elsewhere, as they did in the 1970s, when supertax brought the effective tax rate to 98 per cent for those who earned more than £20,000 (about £200,000 in today’s money).
Not everyone would, of course, but there’s good reason to think that a lot would, because those folk tend to be highly mobile and internationally based anyway. One in four of the very richest people in the country are not originally from the UK, but moved here precisely in order to make money; many of them would presumably move again.
And remember that, though the Laffer curve (which says that if you put tax up too much, you actually end up bringing less money in) is a real thing, it wouldn’t apply to a maximum wage cap, because the Government wouldn’t be getting any more money. The big companies would just be keeping it.
I suppose you could try making them use some of it to pay a higher minimum wage, but the same disincentives apply there. The existing modest minimum wage has acquired a degree of political consensus, but it is probably still a cause of increased long-term youth unemployment; and almost everyone agrees that setting it too high costs jobs, particularly low-paid ones that are vulnerable to automation. At the moment, that’s most of them.
If it doesn’t bring in any money, what is capping pay for? You may think, for example, that the £58 million pay package Tim Steiner, CEO of Ocado, got this year is on the steep side. Or that Manchester United’s goalie, David de Gea, could rub along on less than £375,000 a week.
Yet even if they are paid too much – whatever amount you think that is – it isn’t the reason others get too little. If stopping them from earning shedloads doesn’t benefit the rest of us, it’s hard to see it as anything other than dog-in-the-manger class spite. You shouldn’t attack people just for being different.
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