Expert: Docs99 - 6/18/2009

Question
QUESTION: Hello Sir,
I have read about Minimum wage law. Is there Maximum wage law also? if so then what it is?
I have searched web but not get clear answer.
waiting for answer
Thanks!
Take Care Sir!


ANSWER: Thank you for your query. Thus far there is no such thing as mandatory maximum wages.  Some companies, such as Ben and Jerry's, they do have some capping on wages, eg the ceo may not make more than x number of times the lowest paid employee.  As a matter of fact, minimun wage is a minimun price.  Wages are the price of Labour. Thus, as with any economic factor, good or service, its price should be determined by supply and demand, by the market. Putting a floor or a cap is just a way to introduce more imperfections to the market. Good luck.

---------- FOLLOW-UP ----------

QUESTION: I read introduction article on Wikipedia, on this maximum wage, but didn't understand much. Its seemed that people use both interchangeably. Can I also interpret it same?


Answer
I wouldn't take Wikipedia as a source. You may want to check some Labor Economics textbooks. I don't believe the terms are interchangeable.  Minimum wage was instituted to give a floor to earnings, to protect the workers from abuse, eg.  Maximum, is like a maximum price. You may want to think of this as: you go to the super market and milk cannot be sold under 75cents per quart, and cannot be sold above 1.25$, however, why cap the price with a ceiling?