Jeremy Corbyn’s Ridiculous Wage Cap Proposal

An image of Labour Party Leader Jeremy Corbyn explaining his wage cap proposal.

The following is an opinion editorial and not reflective of’s views.

It isn’t uncommon to hear socialist friendly leftists arguing for an increase in the minimum wage. However, it is rare to find someone arguing for a maximum wage. In what seems to be a show of complete impracticality and stupidity, the Labour Party Leader, Jeremy Corbyn, has argued for just such a measure.

On Sky News today, Jeremy Corbyn suggested that Britain should move towards a system in which wages are capped for ‘high earners’ whose salaries he described as ‘grotesque.’ Not too dissimilar to Bernie Sanders, Jeremy Corbyn bases most, if not all, of his argument on the idea that inequality is fundamentally bad.

When challenged over his comments with the fact highlighted that a disproportionate amount of income tax is paid by the richest in England (in fact the top 1% pay approximately a quarter of income tax), he appeared flustered. He argued that a wage cap would free up extra money that would be available to ‘invest and develop’ their company, thus leading to a better economy.

The problems with this logic can quite easily be shown by simply doing a small calculation for an example business like McDonald’s.

McDonald’s hires approximately 420,000 people. Their CEO, Steve Easterbook, took home approximately $8 million in 2015. If we were to equally distribute this salary over 420,000 people we would only get an average wage increase of $19 a year.

There exist countless other examples but the thing to keep in mind is that most of these companies are so massive that cutting CEO salaries to increase the wages of other workers would simply lead to diluted returns.

By adding such a wage cap we would be putting British firms at a disadvantage. Companies choose to pay what they pay for top executives because they consider it a valuable investment. With a proposal such as a maximum wage, top talent will be forced to go abroad to seek a better deal and we’ll be left with sub-par management as a result.

What I considered quite funny is what happened when the interviewer probed Corbyn further and asked what the cut off wage would be, with the interviewer highlighting Corbyn’s wage of approximately £138,000. Corbyn responded with ‘I think it would be somewhat higher than that’.

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