A Preliminary Introduction to the 40 X rule.
Here is a modest proposal for a simple action to move towards the goal of achieving greater economic equity in our land: just as we have a national law that no hourly worker can be required to work more than 40 hours a week, we should have a national law limiting the maximum compensation any individual can receive to being no more than 40 times what the lowest paid employee in the same organization earns.
The “Occupy Wall Street” mass phenomenon echoing throughout our country—and, indeed, throughout the world—as well as public opinion polls which indicate that a substantial majority of Americans are opposed to the increasing disparities in wealth in our country, cries out for concrete steps to address an issue unraveling our social fabric.
One option that has been proposed is simply to tax the wealthy—in essence to make a maximum wage law. Many Americans, quite naturally, find such a prospect repellant. We are, after all, the land of opportunity. Why should any man or woman not reap the benefits of his or her hard work?
Another option is to require that companies distribute more equitably the profits that a given company makes. One possible model of an equitable distribution of income is the public sector.
The chief executive officer of the Federal government—the President—does not earn more than 40 times what the lowest paid, Grade 1 step 1, government worker makes.
(In fact the President makes closer to 34 times what the lowest paid Federal employee earns. The President’s salary is $400,000 a year, with an expense budget of $200,000; the lowest full-time Federal salary is $17,803.)
This range of salaries in the public sector is not determined by law. It reflects, rather, a general societal sense of fairness in the range of incomes.
(The fact that the highest paid Federal employee—the coach of the Navy football team—receives a salary more than twice that of the President of the United States is an outrage and bespeaks a serious misalignment of our national priorities.)
The 40 X Rule is a proposal to take the public-sector pay scale as a model for private companies and corporations, and require that no private entity offer its top earners a compensation more than 40 times what the lowest wage-earner in that organization makes. If the CEO of a given company is to earn $10 million a year (in actual salary and other forms of compensation such as stock options or interest-free loans), then the lowest paid worker at that company must earn at least $250,000.
As Robert Reich has pointed out, the range of income levels in the private sector has in fact been around 40 X for most of post-WWII America, and it is only recently that the top 1% of salary earners have begun to make orders of magnitudes more than 40 X what entry level worker earn.