Should government set a maximum wage limit in the way that i

Should government set a \"maximum wage\" limit in the way that it sets a minimum wage?

Solution

The maximum wage is a limit on how much income an individual can earn , In a free market economy , setting a maximum wage by government is detrimental to the progress of the economy . The maximum wage limit can act as a deterrent for individuals who wish to work more and get paid more for the job they do . Compensation paid these days is tied to the performance of the company and setting a maximum wage limit will set a trend where individuals are not interested to put more efforts to improve the performance of the firm , as they are aware that regardless of their best efforts they can only recieve the maximum set wages. Maximum wage limit decreases the purchasing power of the individuals and it results in the economy slowning down and recession sets in . The government tax revenues also decreases because before setting maximum wage limit government could impose progressive taxing mechanism in which the taxing authority charges more taxes as the income of the taxpayer increases. A higher tax is collected from the taxpayers who earn more and lower taxes from taxpayers earning less. Due to maximum wage limits in earning , the government tax revenues also decline and thereby government spending also decreases and there will be an overall slowing down of the economy .

Therefore it is advisable to the government not to set a \"maximum wage\" limit in the way that it sets a minimum wage.