Th3.5: Maximum Wages Flashcards
How common are maximum wages?
minimum wages are fairly common but few places set maximum wages
Who do some people suggest there should be a maximum wage for?
for chief executives or a maximum pay ratio compared to the lowest wage earners
How can the government keep public sector spending down?
set maximum pay limits for public sector workers
What will maximum wages help do?
reduce inequality
What will the introduction of maximum wages do?
lead to excess demand within the industry, since people may not put themselves forward for the job if they don’t think the salary matches the stress/responsibilities or if they could get higher wages abroad
The UK may then suffer from a loss of…
a loss of the best workers, which will reduce the quality of business and decrease competitiveness
What does the impact of the maximum wage depend on?
the elasticities of supply and demand - inelastic means there will be little impact
It is argued that supply and demand for the highest paid workers, such as chief executives, is…
very inelastic since there is a small supply of chief executives and firms only need one chief executive so their cost is a very small part of total costs
What kind of effect would maximum wages have if this is the case?
could mean maximum wages will have no effect on the market, other than causing a reduction in wages
