The new UK Labour Party leader, Jeremy Corbyn, said he would consider introducing a “maximum wage”. Does a maximum wage really help to reduce the gap between the poor and the rich? Wage is not the only source of incomes; for the most of the rich, capital gains are much greater than their salaries. A study from the non-partisan Tax Policy Centre shows the higher you go up the income ladder, the greater share of income comes from capital gains. Therefore, even with a maximum wage, the super rich will stay as the super rich. This policy will only reduce the income difference between the low-skilled workers and the high-skilled workers if the maximum wage is not set high enough. I think that reducing taxes on people’s wage and raising taxes on capital incomes will be more effective to create social equity and keep workers productive.
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