Taxing anyone at 90% is insane. Why create an economy based on reward & incentives, then apply some sort of a bizarre communist ethic to the upper middle classes? Effectively you're saying 'you can earn this much and no more' (unless you're rich enough to afford to move to a tax haven).
Also, if you're talking about the individual, there aren't that many people who earn that much, so it's not going to solve poverty. If you're talking about households, it's probably still not a huge chunk, except that there could be two people working their asses off to hit that figure: depending on where you live (& I'm thinking UK equivalent), it may be extremely comfortable, but I'm not even sure it would be considered 'wealthy' as a household income.
I don't have a problem with the government keeping 90% after the first $250K. There's still an incentive to work, and plenty to live on. People making that much aren't really in it just for the money, they're in it to win.
It is true that some people bring in ten times as much money as other people. I'd say the questions to ask are (a) Does that mean they should be getting paid ten times as much? If so, why? and (b) What is the relationship between 'money brought in' and 'value produced' here? It's not obvious that the two can be equated, or that anybody can produce ten times as much value as a skilled teacher.
It's a question of how much it costs to hire a person. If there are only a tiny number of people who can do X, then companies are effectively bidding for them. If everyone can do it then there's no incentive to pay high amounts.
Yes. But more specifically, it's a question of how many people there are who will do X for Y money. So for instance, I doubt Ben & Jerry's would have had such trouble with their income-multiplier policy if they'd been based in Japan, where from what I can gather, nobody expects to be paid a thousand times as much as their employees. Or towards the other end of the scale, it's not as if there's a mad surplus of qualified nurses, but they all expect to be paid quite badly, so they are.
but what does that mean, they bring in ten times as much money? Economics tells us that a price is just a collective opinion, that the price setting people claim that its worth that much.
Imagine a job field, say programming. Now some programmers are much more productive, this is true, some people can produce good code almost as fast as they can type. And some people produce a lot less junk in their code.
Ten times as much good code though? I think that's a stretch. Can you think of any programmer that would have to be replaced by ten other people?
And most jobs can't be analyzed as easily as programming. But there's almost no people that are 10 times as valuable as their coworkers, are there?
Plus, I seriously doubt that those programmers are getting paid much more than their lumpish coworkers. Performance isn't paid for, at least not here in the United States of Liars and Bootyshakers.
There are coders that are worth 10x as much - but not many of them (and AFAIK that's born out by the fact that there are few coders that are paid more than £100k in salaried positions).
Most of the ones that are worth that much are worth a lot because they have domain knowledge, are maths geniuses, or something similar. They're the people that write languages for fun, or can produce incredibly complex models of things that are useful to people with lots of cash.
Google, MS, etc. pay a lot more than the average - but they demand the smartest people.
Apple's market capitalisation in 1998 was $6 billion. Then Steve Jobs came back as CEO. Jobs gets most of the credit for Apple's turnaround since that date, which has given it a market capitalisation today of over $300 billion. Jobs has been worth at least $100 billion, and probably over $200 billion, to Apple. Got any examples of schoolteachers demonstrably generating $200 billion in value?
And when Amelio was ruining Apple, he earned almost $1 mill a year in salary, plus benefits and options. People don't get paid what they're worth. They get paid what they can negotiate, which is an arbitrary opinion of a handful of well placed people.
<irony>Schoolteachers who teach people like Steve Jobs to be people like Steve Jobs?</irony>
OK, that was more funny (to me) than it was actually a good point. I think actually good teaching would make value for the country in general, but I couldn't put a figure on how much -- almost certainly not that much for all sorts of reasons.
If someone is ten times better than me, I don't have a problem with them getting paid ten times more than me.
If, of course, I'm paid twice as much as someone who does half the work that I do (if that's how you define generating value, I guess. "Generating value" is a pretty terrible way to define how much to pay staff, since it's something lower level staff are often actively prohibited from doing)
I'd like an open policy to pay disclosure internally at companies, I think that's a great idea. But only, absolutely only if it went hand in hand with open appraisal grading and disclosure about what work people were doing. That way you'd know that Jack was doing very little work, had a rubbish grade but got paid £30k while Jill was doing vast amounts of great work, got the top grade on her appraisal and was earning £20k because she was technically junior to Jack.
Of course, the other hilarious implication in all these pay structures is that these highly paid people hate their jobs and are ridiculously shallow and only motivated by money.
While different people may disagree on where the line is drawn, there is a point where you cross over from "something approaching average" to "rich" and then to "able to live in luxury". Why should you need to pay for a luxury lifestyle in order to attract them to a job? Is it that being a senior person at a corporation is actually terrible and that's the only way to keep them? Perhaps HR should do a review and see if they can make the job better, so they can attract staff who WANT the job and will do it well, so don't have to be lured there with a bonus.
my original argument, though, is that if you have $3 mil to just throw around, you got too much money. That's an obscene amount of money for something so frivolous.
I think there is. I think, generally, that it's not sometihng other people should control.
Taxes are fine - we take money from richer people to pay for essentials for people who can't afford it, and for necessary infrastructure. But caring that other people have more than you is just jealousy.
Is it, though? I don't think it's that simple. For one thing, that's always money that could be used for something else (but yes, it is money that we've given up into the control of someone else by paying for something, so perhaps we lose all say when we do that?). For another, having some people earning 100x as much as others does weird things to the markets in general. And is it irrational to suspect that something's a bit off with the market if the income discrepancies in one country are several times as large as those in another country of comparable wealth?
Also, while writing this effect off as 'just jealousy' may be in some sense accurate, what do you make of the evidence that people in general tend to be much less happy if they know that other people are vastly better off than them? See e.g. 'Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles'. Even if it is all down to such a base motivation, does that necessarily mean that ignoring such large-scale effects is the right thing to do?
The money could be used for something else - but the point here, as you rightly say, is that it's not your money. If person A gives person B some goods in exchange for services then that strikes me as being the business of those two people (insofar as it's not for illegal purposes). I don't mind a level of tax being paid on it, to fund all sorts of public goods, but saying to person A that they cannot pay person B more than X for their services strikes me as horribly infringing on their freedoms.
I do agree that some bits of the job market are horribly dysfunctional. But I'm not convinced that it's the governments job to make it more functional. I'd rather they just taxed all of the wages at a level which doesn't cause too much of an outcry (say, 50%), and used that money to fund things. Raising it to 90% seems more likely to distort things horrible, and lead to people spending lots of effort to bypassing it instead, making things even more complex.
People are definitely unhappier if there is more inequality - but a lot of that seems to come from seeing opportunities that they cannot possibly have. I'd be much more for focussing on reducing the problems in areas of high poverty by improving education and help for those people so that they have hope. That seems more productive to me.
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Also, if you're talking about the individual, there aren't that many people who earn that much, so it's not going to solve poverty. If you're talking about households, it's probably still not a huge chunk, except that there could be two people working their asses off to hit that figure: depending on where you live (& I'm thinking UK equivalent), it may be extremely comfortable, but I'm not even sure it would be considered 'wealthy' as a household income.
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Imagine a job field, say programming. Now some programmers are much more productive, this is true, some people can produce good code almost as fast as they can type. And some people produce a lot less junk in their code.
Ten times as much good code though? I think that's a stretch. Can you think of any programmer that would have to be replaced by ten other people?
And most jobs can't be analyzed as easily as programming. But there's almost no people that are 10 times as valuable as their coworkers, are there?
Plus, I seriously doubt that those programmers are getting paid much more than their lumpish coworkers. Performance isn't paid for, at least not here in the United States of Liars and Bootyshakers.
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Most of the ones that are worth that much are worth a lot because they have domain knowledge, are maths geniuses, or something similar. They're the people that write languages for fun, or can produce incredibly complex models of things that are useful to people with lots of cash.
Google, MS, etc. pay a lot more than the average - but they demand the smartest people.
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OK, that was more funny (to me) than it was actually a good point. I think actually good teaching would make value for the country in general, but I couldn't put a figure on how much -- almost certainly not that much for all sorts of reasons.
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I don't think it's too late to do that in fact.
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If, of course, I'm paid twice as much as someone who does half the work that I do (if that's how you define generating value, I guess. "Generating value" is a pretty terrible way to define how much to pay staff, since it's something lower level staff are often actively prohibited from doing)
I'd like an open policy to pay disclosure internally at companies, I think that's a great idea. But only, absolutely only if it went hand in hand with open appraisal grading and disclosure about what work people were doing. That way you'd know that Jack was doing very little work, had a rubbish grade but got paid £30k while Jill was doing vast amounts of great work, got the top grade on her appraisal and was earning £20k because she was technically junior to Jack.
Of course, the other hilarious implication in all these pay structures is that these highly paid people hate their jobs and are ridiculously shallow and only motivated by money.
While different people may disagree on where the line is drawn, there is a point where you cross over from "something approaching average" to "rich" and then to "able to live in luxury". Why should you need to pay for a luxury lifestyle in order to attract them to a job? Is it that being a senior person at a corporation is actually terrible and that's the only way to keep them? Perhaps HR should do a review and see if they can make the job better, so they can attract staff who WANT the job and will do it well, so don't have to be lured there with a bonus.
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On motivation
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Leaving aside the question of equivalence...
Re: Leaving aside the question of equivalence...
Taxes are fine - we take money from richer people to pay for essentials for people who can't afford it, and for necessary infrastructure. But caring that other people have more than you is just jealousy.
Re: Leaving aside the question of equivalence...
Also, while writing this effect off as 'just jealousy' may be in some sense accurate, what do you make of the evidence that people in general tend to be much less happy if they know that other people are vastly better off than them? See e.g. 'Relative income, happiness, and utility:
An explanation for the Easterlin paradox and other puzzles'. Even if it is all down to such a base motivation, does that necessarily mean that ignoring such large-scale effects is the right thing to do?
Re: Leaving aside the question of equivalence...
I do agree that some bits of the job market are horribly dysfunctional. But I'm not convinced that it's the governments job to make it more functional. I'd rather they just taxed all of the wages at a level which doesn't cause too much of an outcry (say, 50%), and used that money to fund things. Raising it to 90% seems more likely to distort things horrible, and lead to people spending lots of effort to bypassing it instead, making things even more complex.
People are definitely unhappier if there is more inequality - but a lot of that seems to come from seeing opportunities that they cannot possibly have. I'd be much more for focussing on reducing the problems in areas of high poverty by improving education and help for those people so that they have hope. That seems more productive to me.
Re: Leaving aside the question of equivalence...
But my boss controls how much I am paid.
Re: Leaving aside the question of equivalence...