Jeremy Corbyn has proposed a maximum wage cap to resolve the wage inequality in the UK. The Labour leader says he fears Brexit will lead to the UK becoming a “grossly unequal, bargain basement economy”. Mr Lender, a UK based short term loan provider, explores the effects and how the maximum wage cap might affect you.
According to the Equality Trust, the poorest 10% of the population have an average income of £9,277. The top 10% earn more than nine times this, at over £80,000. While there is a substantial difference in these figures, the top 1% of the country earn far beyond this. In 2012, the average wage for the top 1% of the UK was more than £250,000.
Jeremy Corbyn told the BBC he “would like there to be some kind of high earnings cap”. He also said the maximum wage cap would potentially be somewhat higher than his £138,000 wage. He said “I can’t quite put a figure on it and I don’t want to at the moment. The point I’m trying to make is that we have the worst levels if income disparity of most of the OECD countries.
It’s getting worse, and corporate taxation is a part of it. If we want to live in a more egalitarian society, and fund our public services, we cannot go on creating worse levels of inequality”.
Income inequality is measured using the ‘Gini coefficient’. For countries to be considered equal, the Gini coefficient must be zero. The higher the figure, the more unequal the country is. Chile, Mexico and the United States are considered the three most unequal countries in the world in terms of income. Turkey, Israel and Estonia are just slightly ahead of the UK, which stands in 7th place. Scandinavian countries come in top as the most equal countries in the world for income.
Corbyn stated “what we are also looking at is the inequality of the grotesque levels of difference between the average wages paid in our society, and the sort of telephone number salaries paid at the top end of it and we have growing levels of inequality on that”.
Jeremy Corbyn stated “I think salaries paid to some footballers are simply ridiculous. Some salaries to very high earning top executives are utterly ridiculous. Why would someone need to earn more than £50million a year?”
As an Arsenal fan, Jeremy Corbyn believes Arsène Wenger would probably be in favour of a maximum wage cap. Corbyn said “he’d probably like there to be a maximum wage cap on the whole of the Premier League”.
It has been alleged that by having a maximum wage cap, the taxpayer is likely to benefit. Corbyn said companies would “have less of their enormous pay levels, and more would go back into the company and our society as a whole.”
Jeremy Corbyn will be delivering his first speech of 2017 on Tuesday. He is expected to use the speech to talk about the UK’s position outside of the EU. However this is likely to be overshadowed by his comments on the proposed maximum wage cap.
While Jeremy Corbyn is in favour of a maximum wage cap being implemented, a YouGov survey from 2015 found 44% of people opposed a maximum wage cap of £1million.
Sam Bowman, Executive Director of the Adam Smith Institute, said a maximum wage cap would be “utterly bananas” and it would “hurt British business and ultimately ordinary British workers”. He said “the strategic decisions that top bosses make effect every part of their firm, and multinational corporations are right to spend what it takes to attract the best business leaders to Britain”.
Theresa May’s official spokeswoman said May hadn’t seen “the details of what is actually proposed”. She added “the Prime Minister has been clear that this is a government that is working to deliver an economy that works for everyone. Setting a wage cap is not a policy we are pursuing as part of that.”
How would the maximum wage cap affect you?
For a vast majority of the UK, wages are unlikely to be affected in the short term. A number of people in the top 10% of the population could potentially see their wages capped. However it is not yet known what wages could be capped at if the proposition comes into action. It also isn’t known how many people will be affected by the changes.
As with a vast majority of political decisions, it isn’t known how effective the changes will be. If the cap is implemented, it would be mostly speculation and guess work until we begin to see results.
Theresa May has yet to give her official stance on the maximum wage cap, though it appears she may be unlikely to agree with anything of the sort for the time being.
Although, as 11 million Brits are faced with financial worries, it is possible the government will be expected to make some changes in the near future.