FREQUENTLY ASKED QUESTIONS
Wouldn’t salary-gap moderation lead to capital flight or cause executives to emigrate to where they could earn more?
No it wouldn’t.
Take South Africa for example. The main cause of investor hesitancy in South Africa is the uncertainty caused by the growing inequality in SA, and the strikes, mass action etc stemming from that. Other reasons often sited are minimum wage legislation and other red tape. By addressing these issues, salary-gap moderation would increase investor confidence.
The capital flight and the brain drain from SA are usually blamed on the increasing threats of crime, violence, instability, perceived racial marginalization due to race based empowerment policies, and fear of the rise of populist nationalism. Salary moderation would tackle the cause of all these threats. And because salary-gap moderation leads to a stable political, social and business environment, with a stronger market and a more educated and empowered work force, we would retain more skilled individuals and enjoy increased investment.
Salary-gap moderation is painless. A moratorium on salary increases for executives will mean that the rich will not lose any of their current properties or investments.
Sensible and patriotic business leaders will see the value of the moratorium when they consider the fact that nobody will loose any assets or investments. Instead we will all be gaining a safer, more functional and ultimately freer environment, a stronger and more united country in which to live and do business, and a stronger market for our services and goods.
A stronger economy and country will result in stronger businesses and greater profits.
Wouldn’t better education sort out our inequality?
Education is very important, and the benefits of education are obvious. But because the market price of labour is constantly being undermined by the enormous supply of poor and desperate people, education alone will not necessarily lead to higher wages. A desperate educated person with no capital would still take a poor paying job, and compete for it (making labour cheaper). And “unskilled” jobs will still be very necessary and plentiful, even if we were all university graduates. So unless we decouple our labour price from the market, education will not affect income inequality to the extent that most people believe it will. We have to choose to tackle poverty and inequality and act.
Isn’t minimum wage legislation enough?
The idea of minimum wage probably came about from good intention, and seems to make sense on the surface, but if we really examine the concept closely, its effects on business, societal hierarchy, and the lives of most workers compared to their bosses, then it becomes clear that minimum wage legislation is not working.
Minimum wage legislation is not good for business and it is not good for workers. In fact it has contributed to the growth in poverty, unemployment and inequality.
It has kept many workers in very successful companies in poverty and prevents many entrepreneurs with no capital but with good ideas from starting up companies, and if they do, they are more reliant on capital (loans, investors and venture capitalists) in order become viable.
Minimum wage regulations make our manufacturing companies uncompetitive on the international market place. What’s more, companies that are struggling are expected to pay the same minimum wage that highly profitable companies pay their workers! This makes no sense at all, and leads to more unemployment as companies go out of business on the one hand while increasing inequality within companies that are making big profits on the other as executives take the lions share of wages.
Yes there is some benefit to having a minimum wage: It has allowed workers to live in poverty instead of in dire poverty. But it also has legitimised the imaginary divide between employer and employee, and between capital and labor, where in fact no divide exists. Employers and capitalists are not another species to their employees. We are all human beings. We are all South Africans.
But minimum wage apparently has allowed many executives to imagine that they are somehow a separate species from their workers and society at large….that workers are a species who’s natural and proper place is to exist on hundreds or even thousands of times less pay than the executives themselves earn.
Our business leaders and entrepreneurs should be treasured. Their skills, vision and hard work drive the economy. Obviously, to encourage and reward entrepreneurialism and risk-taking, executives should earn more than their workers, but they should never be allowed to loose sight of the fact that they are human, part of our society, and responsible.
Isn’t it true that “You can’t increase the size of the pie by dividing it”?
No, that is not true.
Imagine a country had one extremely rich trillionaire and the rest of us were dirt poor.
How many iPods, computers, cars etc. would be sold? What would the annual GDP be? How many entrepreneurs would you see? What would the standard of education be? It should be obvious that extreme inequality hinders the economy and that if we distribute the wealth better the economy will grow!
The economy is not like a pie. Think of it more like a tree with fruit and seeds. When you share the fruit, and the people who eat the fruit plant the seeds and water them, they grow, and each seed can grow as big or bigger than the tree it was cut from.