In Businesses linking lowest paid to Highest paid

[trymahjong]

I've read the thread concerning gaps in income but I'm wondering if there were legislation (remember "if") that would link the

highest and lowest wages inside a company (as example the highest paid executive could only make 10x or 15x what the entance level

salary was -------just an example remember) would that have positive ramifications for the economy?

[TheNiche]

The effect of such legislation would create a push-pull relationship between the temptation of firm owners to simply distribute the savings from lower executive compensation back to shareholders (themselves) and relenting to competitive pressures within the labor market for high-skilled labor by increasing the rate of pay of the lowest-level positions within a firm in order to raise the wage cap.

In firms with a disproportionately-sized staff of low-skilled individuals, I would expect that highly-paid individuals would tend to lose out. In firms with a disproportionate number of highly-skilled individuals, I expect that the few low-skilled individuals would win big-time to enable management to earn more money; it would give such firms a huge advantage where hiring practices are concerned...both in terms of attracting high-skilled and low-skilled labor. Intuitively, I think that it hurts the global competitiveness of blue collar outfits like manufacturing and favors finance, technology, etc. And of course, it's not like the favored industries were exactly struggling with global competitiveness issues. So I'd tend to think that it would hurt the U.S. overall with respect to employment and GDP.

A policy like that may also tend to cause executives, whom tend to be at or approaching retirement age, to do just that.

I think that if the idea is to create some kind of a social safety net, there are more straightforward ways to do it with fewer or more manageable market distortions.

[Subdude]

It would seem that such an approach would be extremely difficult to monitor and administer. Probably the immediate effect would be a move to shift compensation more heavily to 'performance-linked' bonuses rather than salaries. I suspect very few executives find it equitable having their pay artificially linked to low-paid people in the same firm performing unrelated jobs. Also I really dislike the notion of government mandated pay structures. If it were a national goal to reduce the concentration of income, more efficient and effective strategies would be to promote unionization or to institute a more progressive income tax regime.

[jgriff]

The first thing that would happen is all the low paid people would be let go or moved to a contractor. If that wasn't possible and the jobs could be offshored they'd do that. It would also make it even harder for people to get entry level jobs. RIght now I don't want any entry level people working for me. Having an entry level person working for you in engineering is worse than having no one at all. They should really be paying us for the opportunity to learn.