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Debate: Salary caps

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Should a mandatory maximum salary be imposed by governments?

This article is based on a Debatabase entry written by Richard Mott. Because this document can be modified by any registered user of this site, its contents should be cited with care.

Background and context

There has been much debate about ‘fat cats’ in the news - bosses of companies who choose to award themselves very high salaries and bonuses that many consider do not match their performance - and these are the people who salary capping would most affect. It is up to the Proposition to define whether ‘salary’ includes bonuses such as stock options, healthcare, pensions, one-off bonuses etc, and who would be exempt, if anyone. A detailed definition is especially necessary for a good debate here. An actual level for the maximum does not have to be defined, but it can make the debate more interesting.

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Argument #1

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Yes

The salaries of some ‘fat cats’ are obscene; it is wrong for some people to eke out an existence whilst others have more money than they could ever spend. A level of about $400 000 a year is sufficient to guarantee a very comfortable standard of living, and the saved money could be put to much better uses. In short, wealth should be distributed more equally in society.

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No

There is no evidence of social tensions so massive that such a fundamental intrusion into the free market by the government is justified. The keystone of capitalism is that successful businessmen and entrepreneurs are rewarded for their dedication, and if the fruit of their labours is taken away then this will only discourage the people on whom our economy depends. Anyway, the sums we are considering are fractional when compared to the budgets of many large companies.

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Argument #2

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Yes

The cap need only be applied to employees, leaving those who have created their own companies to enjoy the high rewards, and preserving the business spirit this country depends on. This would give the best of both worlds - business prosperity and restraint in salaries.

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No

This definition is limited and fundamentally flawed, as many professionals, such as accountants and lawyers work in firms which are actually owned by the senior partners, and are thus free from the Proposition’s restrictions. Hence the ablest workers would be diverted towards these professions by the lure of money, with actual business being starved of talent. Besides, there are several ways a businessman could side-step the cap, for example by avoiding becoming a public, limited company. This would have the side-effect of depriving many businesses of the capital for expansion that public flotation would provide in the name of one person’s personal enrichment.

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Argument #3

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Yes

To turn to those in careers such as the entertainment, the rewards to footballers and singers are insanely high in relation to their actual skill and contribution to society. A much lower rate is desirable when we consider the minute salaries of others who fulfil a more useful function socially. People ought to be rewarded proportionally to what they contribute to society.

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No

As singers and footballers enjoy by their very nature a short and ephemeral career, it is only right that they should be rewarded whilst it lasts. The rule of the market is simple : a job is worth what another person is prepared to pay you to do it. To interfere with this is to undermine the whole market system.

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Argument #4

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Yes

Salary capping would divert more consideration towards vocation and job satisfaction than the money wage. Employees are more likely to commit to one company for its ethos, not switch for a salary, and this would boost productivity. As well as this, badly paid professions such as nurses and teachers would enjoy higher salaries from the redistribution of money.

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No

There is not a reason why employees would not switch to boost their salary, as the vast majority of them will still be under the limit, with corresponding room for improvement. As regards to vocations - teachers and nurses should be totally dedicated to their jobs, and not be merely interested in their next pay packet.


Motions

  • This House would introduce mandatory salary capping
  • This House would force fat cats to slim down
  • There should be a maximum wage
  • No-one needs to earn more than $400 000 a year

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See also

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