Despite only being a few days in, there has been a lot of talk about wage inequality already in 2017. From Jeremy Corbyn’s maximum wage cap to the IFS study into part-time work, our attention is being drawn to the gap between the haves and the have-nots.
Very little debate has occurred so far about why wage inequality may be bad. Corbyn himself seemed to focus on the fairness of it all; believing that it would be much more righteous to limit how much someone can earn rather than focus our attention on putting more money in the pockets of those on lower wages. There is a growing ‘liberal’ consensus which promulgate the idea that if poverty exists then there should not be a space created for wealth.
The fairness argument exposes a basic economic illiteracy and one that policy-makers of a certain frame of mind have a responsibility to educate away. Wealth does not create poverty – it is quite the opposite. Capping wages at a maximum does to tax receipts what cutting ones nose off would do to one’s face. Setting an upper limit on what someone could earn would reduce the amount of tax that could be recuperated, but projections of the damage that could be done could not take in to account the number of wealth creators who may simply wish to earn their money elsewhere.
The moral argument also does not sit well with me. Surely it is better that market forces distribute wages without ideological prejudice than a small group of people place a moral limit on the amount of money someone can earn through employment. What we would be doing is replacing the power of a market force and placing it into the hands of individuals, at whose mercy we shall be placed.
What right or ability does anyone have to determine the value of someone’s experience or economic value annually? There are circumstances under which this kind of intervention may be necessary, in terms of those employed by the state, but even those wages are linked to the wider market value of equivalent skills and jobs.
What possible advantage could a limit bring to those that are earning the least in the UK? It is a move that seems aimed at punishing the wealthiest rather than helping the poorest, and it would do so at the extent of those who benefit the greatest from the tax revenue. We could benefit from revisiting Margaret Thatcher’s response to Liberal Democrat Simon Hughes in 1990; ‘he would rather the poor were poorer, provided that the rich were less rich’.
Alternatively, a reform of income tax to take those that are working minimum wage (or living wage) jobs would do a substantial amount to alleviate money worries for the lowest earners. It would also reduce the nonsensical and burdensome tax breaks and welfare administration, as Eaomonn Butler would put it ‘paying people with one hand and taxing them with the other’. This would also increase the incentive for job seekers to find employment by making wages after tax higher than that received on welfare.
As for the job security, or lack of it, highlighted in the IFS report – the best way to create decently paid, secure, full-time work is by allowing individuals to innovate and create those jobs in the first place. That is the kind of pursuit that can earn you a great deal of money. We should be open in our defence of individuals who want to do just that.
Daniel is a Secondary School teacher in Buckinghamshire and a member of the Wycombe Conservative Association. Follow him on Twitter: @
The views expressed in this article are that of the author and do not necessarily reflect the views of Conservatives for Liberty