No Minimum Wage + Executive Pay Cap

[greenknight]

Would any of you in the DU accept the repeal of the minimum wage if a pay cap was simultaneously administered? I'm taking a management class currently and a management "guru" from the mid-1980s named Peter Drucker suggested that the top salary in a company should not exceed 20 times the pay of the lowest employee. If it did, it would spit in the face of all the other employees who contributed to the company's success.

This would mean that the owner of a company who pays his lowest-paid full-time worker (2000 hours minimum) the federal minimum wage ($5.15/hr), would make 20 * $10,300 = $206,000. I think that would be a reasonable salary for a CEO to make compared to his janitor.

Also, this would make the owner more aware of all his employees' pay. If the owner decided to give his janitor a pay cut to $1/hr ($2,000/yr), then he would only make $40,000 for the year.

Of course, certain issues would have to be addressed, such as invisible executive perks (such as unlimited use of a company jet) and stock options. But all in all, it would be a step in the right direction because it puts the welfare of the top man in direct proportion to the welfare of the man on the bottom. And the cost savings could make it more feasible to provide health insurance, expand business operations more easily, or lower prices.

[DuctapeFatwa]

1. Minimum wage should be directly tied to congressional salaries

Maybe 25%

Congress should make the decision whether to raise the minimum wage to 25% of what they get, including allowances, or take a pay cut.

[Marymarg]

2. I agree!

The CEO's income should also be tied to workers' wages.

[DuctapeFatwa]

4. no prob with tying to CEO's but 20 times is too high

The problem with the minimum wage as it is is that it's not a living wage.

When the market determines that the value of a day's labor is less than the market price of what it takes to provide the basics of survival for the laborer, that is kind of like an economic nuclear attack.

According to the gov's own figures, the average apartment costs almost 4 times the minimum wage.

Anybody who works 40 hours a week should earn enough for housing, food, transportation and medical care.

When that is not the case, as it is not now, what you eventually get is Rwanda or El Salvador.

Even if I am affluent, it is not in my best interests to have the society I live in comprised of a small clutch of people like me and richer, and a huge multitude of people so desperately poor they have nothing to lose.

[FloridaPat]

3. THey sorta have a million dollar cap now. Through IRS

rules, a corporation can't deduct salaries greater then 1 million as an expense. So they make it up in bonuses. They will find away to get around it. Sounds good on paper, but can you see Bush's buddies taking a several million dollar pay cut? How would they be able to keep their 7 homes - like Ken Lay.

[jafap]

5. Speaking as a janitor ...

You seem to overlook the possibility of out-sourcing. Although I cleaned the IMI Cornelius plant, I did not work for them, but for Midwest Janitorial. Thus a CEO can hire a janitorial firm that pays $2 an hour and has a CEO making $40 an hour, and not affect his own wage at all.
Then you also have the question of billable hours. CEOs might easily claim that they are working 3000 hours a year.
Also things like insurance, vacations, sick leave, and holidays add to the cost of labor without adding to take-home pay. So does the payroll tax. CEOs would have an incentive to get rid of them and substitute cash so they could increase their own salary.
As with the outsourcing, there are probably many small companies where the ration is less than 20 to 1.
I am not sure why you need to do both. Why not have the minimum wage AND the executive pay cap? Economists do not like "caps" on principle, but a higher marginal tax rate is an incentive. Who wants to make another $100,000 if $60,000 of it just goes to the government?

[southern_demo]

6. really dumb idea

what happened to common sense in your part of the world. did it dry up in the summer heat?

For starters, there are many people more than the "boss" who make more than 10 times the amount paid to the lowest costing employees. My favorite examples are baseball players, but there are many others (health care, teaching, banking, etc., etc.)

Second, people have to earn enough to pay for their education. A JD or MBA from Harvard is a $200,000 investment, not including deferred income. You have to pay these people very well to get them to undertake the education.

Third, there is the risk of ownership (i.e., most owners borrower to be in business). People are not going to risk it all without the reward of high returns.

Last, the law you propose can be easily circumvented through outsourcing. You just contract with a separate company for the services you need.

And, I didn't mention the costs of all the paper work and compliance.

There are far better, fairer ways to redistribute income--public education, progressive taxes, public health and transportation.

[German-Lefty]

7. Don't just cure the symptom

Why the hell are American execs paid such insane salaries. I remember hearing when (I think it was) Daimler and Chrysler hooked the accountants got worried "why there was an extra zero after all the salaries of the American exec's salaries."!!!

I'm not sure an artificial factor of 20 or 200 would be a good idea. There has to be some reason why these guys get paid so much. My guess is that you have to be in a club of chronies to have a chance.

Hehe, in Texas they had salary caps for thier legislators in thier constitution. Some of them were actually on welfare!!! I wouldn't say it made them any less corrupt.

:think:Ohhhh, perhaps these large excessive salaries are the result of a lack of competition and chrony politics. The large companies have nothing to fear from competition, so there's no chance someone else could set up a company that would do the same and not waste so much on execs.

Of coarse maybe in some cases these guys actually deliver something worth the millions they're paid.

[sirshack]

8. My thoughts...

...based on what you've said about Drucker and where you heard it, it doesn't sound like Drucker is proposing a regulation...just a business model which a business can adhere to or simply ignore.

I think your idea is a fine one for any CEO who wants to institute it, but I don't think it's something that should be made into law, ESPECIALLY restricting a company's lawful use of its own resources (the company jet).

[area51]

9. "No Minimum Wage + Executive Pay Cap"

greenknight said:

"Would any of you in the DU accept the repeal of the minimum wage if a pay cap was simultaneously administered?"

Hell, no. Management would just find ways around it, and you know that many bosses would pay their workers $0.01/hour if they could get away with it.