Understanding 'Maximum Wage': A Bold Policy Targeting Economic Inequality

Understanding 'Maximum Wage': A Bold Policy Targeting Economic Inequality

The growing gap between the richest and poorest Americans is a root cause of poverty, social inequality, crime and other problems.

Among the proposed solutions have been additional taxes on the rich, a higher minimum wage and more aid to the poor. Such ideas rarely get far in a Congress that is largely controlled by corporations and wealthy individuals.

Sam Pizzigati, author, labor journalist, and associate fellow at the Institute for Policy Studies has come up with a radical new idea. In his book “The Case For a Maximum Wage,” he calls for a limit on the amount of wealth any individual can amass. The idea is that by capping income at a certain amount, which would still be far more than most Americans dream of making, there would be more money to go around for low and middle-income people.

Pizzigati also suggests hiking the minimum wage, a cause championed by those involved in the national campaign for a bottom pay rate of $15 per hour. Progressive Democratic candidates in this year's mid-term congressional elections have found that many of the party's voters are receptive to the issue.

Instead of demanding the “redistribution” of wealth, which conservatives have long opposed, Pizzigati argues that the focus should be on “predistribution.”

In an interview with Truthout.com's Mark Karlin, the author explained: “Progressives have traditionally responded to wide gaps between rich and poor by calling for a redistribution of income and wealth, and taxes have usually been how we try to redistribute. We typically push for high tax rates on high incomes, then use the revenues these taxes raise from the wealthy to create opportunities for those without much wealth at all.”

Pizzigati noted that during the mid-20th century, many policymakers became concerned about the disproportionate share of wealth that those at the top were amassing. They were alarmed that in the richest country in the world, an increasing number of working people were not making enough money to cover their basic needs.

Congress responded with legislation that “helped the United States become substantially more equal,” Pizzigati said. “We went from a nation where the richest tenth of the top 1 percent took home nearly 900 times what the bottom 90 percent (of) Americans were averaging, to a nation where our richest few were only making 114 times the bottom average.”

But the reforms ultimately failed to accomplish their objectives. “This redistributive approach assumed that high taxes on high incomes would always fix whatever inequality our economy generated,” Pizzigati said. “But the rich, in real life, refuse to cooperate with the fixing. In the last third of the 20th century, they pounded back against high tax rates. They used their wealth and power to carve loopholes in the tax code and eventually won huge cuts to America’s high tax rates on high incomes.”

That led to the United States becoming “much more unequal as a nation,” according to the author. He pointed out that “our top 0.1 percent is once again averaging 900 times more in income than our bottom 90 percent.” Pizzigati declared that the “lesson we should take from all this” is that “redistribution alone can never be enough.”

“We need to battle for an economy that generates less inequality in the first place, and that means working to identify the institutions and policies that funnel — that predistribute — excessive rewards to the already wealthy,” he said.

When Karlin mentioned that “the wage and salary portion of our national income has been decreasing,” the author responded: “This declining labor share of national income — American workers essentially lost half a trillion dollars in paycheck income between 2000 and 2015 — reflects the power of the rich who control our corporations. These rich have no significant limits on how much they can grab.”

Pizzigati recalled that “before 1980, big-time corporate CEOs averaged no more than two or three dozen times what their workers took home.” He added: “Today’s top corporate execs routinely earn several hundred times what their workers make. They can make more in a morning than workers can make in a year.”

The author went on: “Outrageously lush rewards like these give executives an incentive to behave outrageously, to do whatever they feel they must to hit the corporate jackpot. They’ll downsize. They’ll outsource. They’ll cheat consumers. They’ll even jeopardize lives — by unconscionably raising prices on prescription drugs people need to survive. That incentive structure needs changing.”

Inequality.org explains on its website that the wealth gap is worse than the disparity in Americans' incomes. Wealth, or net worth, is the difference between a person's assets and liabilities.

“Assets can include everything from an owned personal residence and cash in savings accounts to investments in stocks and bonds, real estate and retirement accounts,” the organization wrote. “Liabilities cover what a household owes: a car loan, credit card balance, student loan, mortgage or any other bill yet to be paid.”

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