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Transatlantic Blog

Jeremy Corbyn’s maximum salary: When bad ideas cross the Atlantic

The newest section of Acton's website is dedicated to ideas that have impacted the transatlantic sphere, both positive and negative. Among the latter is the recent proposal by the foremost political leader of the British Left, Labour Party leader Jeremy Corbyn, to establish a maximum wage – a limit to how much money anyone can earn in a year. Among the historically literate, this proposal is linked to one of America’s most reviled figures.

Earlier this month, Corbyn told BBC Radio 4’s “Today” program, “I would like there to be some kind of high earnings cap, quite honestly.” While he tried to walk back his statement – a spokesman said he “misspoke” – Corbyn said executive pay is “driving poverty pay” on the other end of the wealth spectrum.  

That idea had a prominent American exponent: Huey "Kingfish" Long. During the darkest days of the Great Depression, the bayou’s would-be dictator unveiled a plan that pushed Franklin D. Roosevelt’s New Deal further toward collectivism. Senator Long of Louisiana included the maximum salary as one plank of his “Share Our Wealth” program in 1934: “No yearly income shall be allowed to any person larger than from 100 to 300 times the size of the average family income.” This ultimately included government confiscation of all fortunes (not incomes) above $8 million – an idea that originated in Europe.

While Corbyn did not name a dollar figure for his proposed maximum salary, it would undoubtedly be higher than Long’s figure of $1 million annual salary in 1934 dollars, or approximately $17.9 million today. But the policy’s substance – as well as its faulty economic premises, unintended consequences, and harm either plan would inflict – would mirror one another on either side of the Atlantic.

Unlike Long, Corbyn does not fancy that his plan originates in the Scripture. “Some criticize that plan,” Long said in a 1935 radio address, “but it is prescribed by the Bible.” He claimed to locate his plan in a handful of passages, particularly “Leviticus 26.” (He likely meant Leviticus 25, the Biblical Year of Jubilee.) However, locating the plan’s precise locus proves tantalizingly elusive. The Biblical Jubilee returned people’s own property to them, rather than redistributing others' wealth.

But the Labour leader shares Long’s view that the economy is a zero-sum game in which one person necessarily succeeds at the expense of someone else. Long once said:

How many men ever went to a barbecue and would let one man take off the table what’s intended for nine-tenths of the people to eat? The only way you’ll be able to feed the balance of the people is to make that man come back and bring back some of that grub that he ain't got no business with! 

Senator Long used the biblical metaphor of a feast, or a banquet. However, his exegetical skills do not match his oratorical gifts. God does not send barbecue fare in its finished form. (Who wants to barbecue a radish?) God provides cattle: human exertion transforms the raw material into sirloin, ribeye, porterhouse, or filet mignon, depending on its area of specialization. 

The Long/Corbyn plan’s foremost problem is creating disincentives to work and wealth creation. Once someone reaches the maximum salary the government decides he or she deserves to earn, that person will simply become idle. Why work if she cannot benefit any further from her efforts? Worse, the nation's populace, as embodied by its laws, tells people they have no further productive contribution to offer society ... at least, for the rest of that fiscal year.

Should governments impose a maximum salary, CEOs who do not go on holiday will find other ways to receive the same amount of remuneration. For instance, white-collar workers may enjoy an enhanced benefits package or stock ownership options not subject to the salary cap. A maximum salary simply diverts a greater percentage of an entrepreneur's mental energy away from the creative ends he might otherwise pursue, such as developing new products or refining services to better serve the common good. 

Less economic activity has consequences for all of society, including the government. “With a maximum salary of £150,000, the Treasury would lose £26 billion a year in income tax,” wrote Richard Teather of the Institute for Economic Affairs, in addition to £9 billion in contributions to the National Insurance Fund.

Were this purely punitive policy to succeed in lowering top-bracket pay, the poor will not necessarily receive a raise. “It’s just not the case that cutting the wages of people at the top will boost the wages of people at the bottom,” Sam Bowman of the Adam Smith Institute explained. “Companies spend what they need to, to get resources they need – they don’t just have a big pot of money to spend on things. If we banned firms from spending more than a certain amount on IT services, we wouldn’t expect the money they had left over to go into workers’ wages.”

The poor lose out, as wealthy CEOs (and actors and sports stars, etc.), who are most able to leave the country, go abroad in search of better compensation. The poor, society’s least mobile, must stay behind as UK firms are deprived of the most sought-after talent and fall behind foreign firms led by expatriates. Meanwhile, as fewer domestic goods are produced and fewer services are improved, costs rise and quality erodes – creating economic hardships that disproportionately burden the poor.

No aspect of this policy serves society well: neither the producers who are coerced into not using their gifts, nor the consumers who are denied material improvement merely for the furtherance of envy.

For a more accurate assessment of the Leviticus 25 Jubilee, see this article in Religion & Liberty or the book The Other Law of Moses, both by John L. Kelly.


Rev. Ben Johnson is a senior editor at the Acton Institute. His work focuses on the principles necessary to create a free and virtuous society in the transatlantic sphere (the U.S., Canada, and Europe). He earned his Bachelor of Arts in History summa cum laude from Ohio University and was inducted into Phi Beta Kappa.