Maximum Wage

A maximum wage, also often called a wage ceiling, is a legal limit on how much income an individual can earn. This is a related economic concept that is complementary to the minimum wage used currently by some states to enforce minimum earnings. Both a maximum and minimum wage are methods by which wealth can be redistributed within a society.

Advocates argue that a maximum wage could limit the possibility for inflation of a currency or economy, similar to the way a minimum wage may limit deflation. If these hypotheses are true, implementing both pieces of legislation would achieve an economy with wages that cannot inflate or deflate past the point of the relative maximum/minimum wage (respectively). Accordingly, wages in the economy would hover between the maximum and minimum, and the populace would live between the two wage points. Supporters say a maximum wage could also reduce devaluation of a currency by limiting the amount any member of the populace can earn, and consequently effectively limiting the availability of currency. Economists of the monetarist school hold that this position is false; instead they believe that inflation is controlled by growth in the money supply according to the quantity theory of money, rather than through growth in actual wages.