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ppauper
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minimum wage vs maximum wage

January 12th, 2017, 8:19 am

UK Labour Leader Slammed For "Totally Idiotic" Salary Cap Plan

question: why is a minimum wage now considered "normal" but a maximum wage ridiculed?
both distort the market and both interfere with the contract between employer and employee

I believe (from distant memory, maybe rehnquist's book?) that in the US, a federal minimum wage only came about during fdr's reign, after he threatened to stack the Court.
Previously, the Court had held that the government had no right to interfere with the contract between employer and employee
 
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ISayMoo
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Re: minimum wage vs maximum wage

January 12th, 2017, 3:12 pm

"question: why is a minimum wage now considered "normal" but a maximum wage ridiculed?"

Because media bosses are affected by the latter but not by the first.
 
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Paul
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Re: minimum wage vs maximum wage

January 12th, 2017, 3:22 pm

ISayMoo wrote:
"question: why is a minimum wage now considered "normal" but a maximum wage ridiculed?"

Because media bosses are affected by the latter but not by the first.

Very good!
I like the idea. 
 
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Traden4Alpha
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Re: minimum wage vs maximum wage

January 12th, 2017, 4:02 pm

The lower bound on wages is set by what an individual must take from society to survive.

The upper bound on wages is set by what an individual can give to society to thrive.
 
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ppauper
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Re: minimum wage vs maximum wage

January 12th, 2017, 5:33 pm

Traden4Alpha wrote:
The lower bound on wages is set by what an individual must take from society to survive.

The upper bound on wages is set by what an individual can give to society to thrive.

that might be true in a socialist utopia, but elsewhere, people tend to work for an employer rather than "society"
 
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Traden4Alpha
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Re: minimum wage vs maximum wage

January 12th, 2017, 5:57 pm

ppauper wrote:
Traden4Alpha wrote:
The lower bound on wages is set by what an individual must take from society to survive.

The upper bound on wages is set by what an individual can give to society to thrive.

that might be true in a socialist utopia, but elsewhere, people tend to work for an employer rather than "society"
The mechanism by which someone gives value to society (and can reasonably be expected some proportional compensation) is irrelevant. Yes, most people work for employers but the employers work for their customers who are other members of society. To the extent someone helps someone else provide value to a third person and that third person pays the second person, the first person might expect some proportion of that pay as a function of the first person's role in the effort. And in such a system of proportional pay for delivered goods and services, is there an upper bound?

(Technically, there is an upper limit based on the finite number of people, finite spending of each person but it's a very high number)
 
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Paul
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Re: minimum wage vs maximum wage

January 12th, 2017, 6:39 pm

Senior employees are chosen by other senior employees, who also give each other seats on the boards of other companies. Is this in the best interests of the shareholders? I suspect not!

Put CEO etc. positions out to tender.
 
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Traden4Alpha
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Re: minimum wage vs maximum wage

January 12th, 2017, 6:59 pm

Paul wrote:
Senior employees are chosen by other senior employees, who also give each other seats on the boards of other companies. Is this in the best interests of the shareholders? I suspect not!

Put CEO etc. positions out to tender.
Yet a cap on wages would have no effect on this dynamic. Even the most socialist society has ways for individuals to create differential outcomes for differential actions. The better comrades get the better dachas.

In modern low-friction equity markets, shareholders are remarkably free to prefer or eschew shares in well-run or corrupt organizations. And in modern retail markets for goods and services, most consumers are remarkably free to prefer or eschew the offerings of different companies.

One might argue that the current capitalist system already creates upper bounds on executive compensation in that companies that over-compensate their executives would have trouble attracting customers, lower-level employees, and investors.
 
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Paul
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Re: minimum wage vs maximum wage

January 12th, 2017, 8:21 pm

Not sure how relevant all that is.

A cap would result in an immediate Posh-Boy Drain. The question is whether we'd notice any difference to performance. At the moment shareholders don't really have any stats on how important high pay is.
 
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Cuchulainn
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Re: minimum wage vs maximum wage

January 12th, 2017, 9:00 pm

One might argue that the current capitalist system already creates upper bounds on executive compensation in that companies that over-compensate their executives would have trouble attracting customers, lower-level employees, and investors.

Not it doesn't. 
And when executives screw up they move + golden handshake and the taxpayer foots the bill as happened recently in Ireland. Profit is capitalised, debt is socialised.
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Traden4Alpha
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Re: minimum wage vs maximum wage

January 12th, 2017, 10:51 pm

Paul wrote:
Not sure how relevant all that is.

A cap would result in an immediate Posh-Boy Drain. The question is whether we'd notice any difference to performance. At the moment shareholders don't really have any stats on how important high pay is.
What does company X offer to executive A to get him/her to leave company Y if executive A is already at max salary? Fewer hours? More hidden perqs?

The key element of the statistical distribution of salary isn't the level of the maxima, but the existence of differentials. Given any two people with different skills, experiences, accomplishments, personalities, etc. what is the difference in their salaries? Under what conditions should person A earn just 10% more than person B? What's the reasonable differential for a year of experience, a college degree, people skills, a college degree from a good school, or a PhD? And what if a person shows quantitative differences in productivity relative to their peers? If one extraordinary person can produce as much as two ordinary people, wouldn't the extraordinary person expect more pay?

It doesn't take many reasonable 10% pairwise differences across a working population of millions or billions of people to create a 1,000,000:1 ratio between the least-paid and most-paid person. It's the chaining of these reasonable differentials that drives the extrema.
 
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Paul
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Re: minimum wage vs maximum wage

January 12th, 2017, 11:04 pm

I think there are virtually no extraordinary people running large companies. I expect the pool of relevantly talented people is at least ten times the size of the pool from which CEOs are drawn.

The extraordinary people are the ones starting their own businesses and risking everything. And there is almost zero correlation between these people and typical CEOs.

If people can run countries with no relevant skills and a relatively tiny salary but the assistance of some managers then I am pretty certain that people can run large companies on an equally small salary!
 
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ISayMoo
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Re: minimum wage vs maximum wage

January 13th, 2017, 12:14 am

Paul wrote:
Not sure how relevant all that is.

A cap would result in an immediate Posh-Boy Drain. The question is whether we'd notice any difference to performance. At the moment shareholders don't really have any stats on how important high pay is.

Actually, it's pretty much established there is no positive correlation between executive pay and company performance:
http://www.forbes.com/sites/susanadams/2014/06/16/the-highest-paid-ceos-are-the-worst-performers-new-study-says/#774aacc3293a
http://chiefexecutive.net/higher-ceo-pay-produce-better-company-performance/
Paying CEOs with equity doesn't help, because they just do buybacks to put company money in their own pockets. Taxed at  lower, capital gains rate. Because it's "risky profit".
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