Let's look at price controls in a relatively frictionless labor market. Results are fairly simple to graph or predict. Employees for whom the marginal product of labor is greater than the price cap, leave the regulated area of the market for the unregulated area where they will be rewarded commensurate with their contribution and employees who are less productive will stay. The regulated companies will underperform the unregulated companies and the gap will continue to get larger.
At first glance, this would be the worst possible action to take on behalf of taxpayers, because it ultimately destroys the value of our stakes in the regulated companies. ...
But, it makes perfect sense, if you also bring back indentured servitude for all of the bankers who profited for years and then expected the taxpayer to bail them out. If you restrict pay and restrict the labor market at the same time, then the owners of the regulated companies can earn monopoly profits on behalf of the taxpayer and allow us all to indulge in much more pronounced schadenfreude than a mere cap on income of 500k.
If CNBC reported correctly & I was not hallucinating, the $500,000 limit will apply to something like only the top 20 executives. Traders then will still be able to take home the kind of pay Tom Cruise gets. My favorite hallucination involves the banking executives who took home tens of millions of dollars each year to be insulted by the thought of salaries of less than $1 million/year & quitting (& then paying for their own health insurance, club memberships, limos & drivers).
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