Acton Institute Powerblog

Should the government cap CEOs’ salaries?

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Ideas have consequences, but they do not have geographical boundaries. The latest example of this truth is UK Labour Party leader Jeremy Corbyn’s proposal that the government impose a maximum annual salary on British residents – an “earnings cap” on how much anyone could earn in any given year.

The idea enjoyed massive popularity in the United States during the Great Depression due to the charismatic support of one man: Senator Huey “Kingfish” Long. The Louisiana governor and senator claimed that his “Share Our Wealth” program was found, fully formed, in the Book of Leviticus’ prescription of a recurring Year of Jubilee. I assess the notion’s shortcomings, biblical and economic, in a new commentary in Religion & Liberty Transatlantic:

The Long/Corbyn plan’s foremost problem is creating disincentives to work and wealth creation. Once someone reaches the maximum salary the government decides he or she deserves to earn, that person will simply become idle. Why work if she cannot benefit any further from her efforts? Worse, the nation’s populace, as embodied by its laws, tells people they have no further productive contribution to offer society … at least, for the rest of that fiscal year.

Should governments impose a maximum salary, CEOs who do not go on holiday will find other ways to receive the same amount of remuneration. For instance, white-collar workers may enjoy an enhanced benefits package or stock ownership options not subject to the salary cap. A maximum salary simply diverts a greater percentage of an entrepreneur’s mental energy away from the creative ends he might otherwise pursue, such as developing new products or refining services to better serve the common good.

Read the full article here.

 

(Photo: Senator Huey Long, Public Domain)

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Rev. Ben Johnson Rev. Ben Johnson is Managing Editor of the Acton Institute's flagship journal Religion & Liberty and edits its transatlantic website.