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Aaron McKenna: Jealousy of the successful is not a viable economic policy

There are many reasons why a Swiss-like pay proposal is a bad one. For one, the top one per cent of income earners in Ireland pay 20 per cent of the income tax, writes Aaron McKenna.

Aaron McKenna

SWISS VOTERS WILL go to the polls tomorrow to decide whether or not to limit executive pay in the country to 12 times the salary of the lowest paid workers in their company. The measure is looking increasingly likely to fail as the Swiss consider the economic hari-kiri that would follow the catharsis of seeing the successful brought down a peg or two.

The measure has attracted widespread popular support, even if it doesn’t in the end pass, and is leading to calls for similar measures to be considered across Europe. People have been badly burned by the economic depression that followed the 2008 crash, and the perhaps natural tendency has been to look at all those who are doing well through their success and think about ways of punishing them as a group.

Bad idea

There are many reasons why a Swiss-like pay proposal is a bad one. For one, the top one per cent of income earners in Ireland pay 20 per cent of the income tax.

If their pay has to suddenly drop to twelve times the lowest paid worker, that income tax disappears. Now, proponents will say that the lowest paid will get an increase so the fat cats can keep their wages. At which point the cost of delivering goods and services will go up, and we’ll all actually need pay increases to stand still. That’s called inflation.

The other way of avoiding this catch is to move management and high-level jobs in a company to some other jurisdiction. Support jobs would go with them, and so would opportunity for future expansion of the business in our country. The Swiss are considering that a third of their employment comes from companies that sell globally, and have offices globally that they might move to if the local environment were to become more hostile to success.

Jealousy

When you drill it down, the main reason that this sort of proposal is a bad idea is because jealousy is not a sound economic policy. People are angry because of what has happened in the global economy, but that is not the fault of anyone and everyone who is well off just the same as it is not the fault of ordinary homeowners as a group who fell over themselves to buy and sell property and inflated prices.

This sort of a proposal to curb executive pay is an attempt by socialists to make themselves feel better for having punished the rich for their success; and to hopefully manage to win a few pay raises without having to be any more successful themselves.

Brendan Ogle, the head of the ESB workers union, was caught on tape some time ago telling of how his members – the highest paid electricity workers in Europe, planning a strike sometime soon – have come to be spoilt and expect the gravy to be poured down from on high.

Socialism

This is what socialism is these days, for the most part. We’ve got laws a plenty to prevent unscrupulous employers from treating their employees like Tzarist serfs and we have pretty much eliminated scourges such as starvation from our land. If you fall down, there is a safety net to catch you. 50 per cent of the Irish population was caught by the welfare safety net and benefitted from a payment last year. It’s hardly Victorian poorhouse stuff.

At the heart of socialism is jealousy of the meritocracy. Not content for there to be more equal opportunities for all, in education particularly, the proponents of pay caps and other related measures want there to be guaranteed equality of outcome. No matter how hard you work, you ought to be capped in how much more successful you can be than someone else. Oh, and we’d like to tax the bejesus out of you even more than we do today. You can always afford to pay a ‘little bit’ more.

Income levels

Now that everyone is better off today in real terms than they were twenty or fifty years ago, left wing begrudgers cry at the relative gap between income levels. If the rich are getting richer faster than others, they must be stealing that from someone else! Err, no. Perhaps it’s that the rich today are better at creating the innovations that drive our society as a whole to new and better quality of life.

And say you are getting ripped off. Say the more successful are just conniving to take a bigger lump of the prosperity we have all enjoyed when we compare Ireland of today to that of yesteryear. What then? Time for pay caps?

I’ve done well for myself, as I’m sure some may be inclined to point out in response to this piece. I have a personal interest. But I’m not the son of a rich man. My parents came up from the working class. No third level education or money in our family, or for me personally. I have what I have because of merit and hard work. Most people who’ve done well that I know are the same. People from Finglas and Drogheda rather than Foxrock and Donnybrook.

If socialists feel we’ve done them a hard turn through our success – whatever about jobs we’ve created from the risks we’ve taken and so on – I would ask… What was it, precisely; in between the day we started in the same sort of schools, from the same sort of backgrounds and with the same sort of upbringing that we did to do them out of getting theirs?

Jealousy isn’t a sound economic policy. We’d be better off focusing our energies onto ways that we can earn more than ways we can limit someone else from doing so.

Aaron McKenna is a businessman and a columnist for TheJournal.ie. He is also involved in activism in his local area. You can find out more about him at aaronmckenna.com or follow him on Twitter @aaronmckenna. To read more columns by Aaron click here.

Read: Swiss vote on limiting top pay to 12 times that of lowest paid workers>

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