Iain1Iain McKenzie, Labour MP for Inverclyde, here sets out why he believes that, alongside a National Minimum Wage, we need a National Maximum Wage.


We’re all used to the idea of the National Minimum Wage. This policy, introduced by the last Labour Government and voted as the best of last 30 years by the Political Studies Association, ensured no one went unrewarded for hard work.

Yet a minimum wage can only go so far if corporate salaries continue to escalate as they are doing. We are now living in a world where the bosses of Britain’s biggest companies had already made more money in 2015 by January 6th, than most workers in the country will earn in the entire year.

Indeed, CEOs are now receiving twice as much total remuneration as they were a decade ago. Are they working twice as hard? Or are they just twice as important as the rest of us?

The official justification is that such salaries are necessary, to attract the best and as a reward for their hard graft. But the reality is that executive pay has become a kind of racket, with a small club of non-executives voting themselves huge rises and ignoring their shareholders

The FTSE has barely moved a notch over the last 10 years. In some cases top businessmen receive gargantuan pay-offs after they have brought a company to its knees. So the very idea of extreme performance related pay is ridiculous.

Most of the teachers, doctors and workers across the country don’t expect multi-million pound bonuses just for working hard.

However, not only is this farcical, it is actively harmful. Extreme disparities are bad for businesses, encouraging risk taking whilst also increasing resentment in the workforce.

It is also bad for the social fabric of our country. Income inequality is a big and growing problem. The IMF has said countries with bigger disparities see their economy more frequently plunged into deeper recessions, while economic growth lasts much longer in more equal societies

That’s why I led a debate on Tuesday calling for a Maximum Wage.

Through legislation or tax incentives, we could make companies pay their CEOs no more than 100 times the average salary of non-boardroom staff.

The naysayers will say this is anti-business, and unachievable. But plenty of other countries have similar policies.

Take the move to cap bankers’ bonuses a few years ago. The rest of Europe backed this justifiable and necessary move, finding it unthinkable that after all the banks had done wrong in causing the crisis, those at the top could still receive lavish remuneration.

It was George Osborne who took exception, making a failed attempt to label the move “illegal”.

Since launching my Maximum Wage Campaign earlier this week, I’ve been contacted by people in countries such as Switzerland and the US offering their support.

It was in Switzerland that the idea took root a few years ago. People voted on a maximum wage no more than 12 times higher the lowest wage. It was rejected, but the Swiss were at least given a choice on the matter.

In the US, Rhode Island passed a bill that would give corporations with a top-bottom pay ratio under 32-to-1 preferential treatment in state government contract bidding. In California, a majority of state senators backed legislation that would subject corporations with excessive pay ratios to a higher corporate income tax rate.

If a country based on free market ideals such as the USA can encourage lower top to bottom pay ratios, it can almost certainly be done here.

There already exist forward looking companies that enforce top to bottom pay ratios. Big British businesses like John Lewis cap executive pay at 75 times the average salary in the company, while the TSB don’t pay their CEO any more than 65 times the wages of their frontline employee.

This isn’t about taking money from people. On the contrary, it’s about raising standards for everybody. If a CEO wanted a pay rise, he would have to ensure the average worker’s salary increased too. With pay ratios, money would be distributed more equitably throughout a company while still ensuring those at the top receive decent remuneration.

We could bring this about situation by following America’s example, offering government contracts to those companies with the lowest top to bottom pay ratios, and encouraging less extreme salaries through tax incentives.

A maximum wage would ensure that in a time of growing income disparity, we all mind the gap.

If you support my campaign for a maximum wage you can sign the petition here: https://you.38degrees.org.uk/petitions/introduction-of-a-maximum-wage

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3 thoughts on “Why we need a maximum wage

  1. You know as well as I do that Miliband, Balls etc would run a million miles from this idea especially after trumpeting how ‘pro’ business they are. Even Labour supporting businesses would question Ed’s sanity. If (and that’s a big if) there was ever a time this proposition could have flown in the Labour party, that time is long gone. (Cameron would just love to hear Ed suggesting this).

  2. Why does Labour party policy proposal in opposition never reflect Labour party policy in Government?
    Its all very well mouthing off “populous” ideals and intent when you’re not in a position of not having to actually deliver but to do so when you have a proven past record of non delivery of “populous” policy and a proven publically recorded record of criticising the very concept of “populous” policy only goes to reinforce the electorates distrust and contempt for those who do so. Especially when its just before another election.

    Labour are being judged on what they have done not on what they pretend they intend to do if given yet another chance of betrayal.

  3. I agree on the principle, but 75x the average salary is still a huge gap. High rollers would find loads of ways to get round this, but it’s still worth making the point. You are also right to question how these CEOs are walking away with absurd pay offs.

    And I also agree with the comment above that the right wing press would have a field day on such a policy!

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