Sociology

When the Government Controls Prices or Supply, Should the Government Set Maximum Wages and Profits?

When governments control prices, supply, or market entry, unlimited wages and profits create wealth where it is not deserved. Maximum wage and profit limits help balance power, protect trust, and prevent abuse.

T Jackson

24 Jan 2026 — 3 min read

Photo by Igal Ness on Unsplash

Abstract

Governments influence markets in several ways. They set prices, limit supply, and control entry. This happens through licenses, permits, and intellectual property rights. Thus, if governments influence price or supply, they should also set maximum wages and profits. This promotes fairness, balances power, and ensures ethical use of authority by individuals. Critics claim wage caps harm talent and innovation, but does this claim even pass the smell test?

Reason 1: Controlling Supply Without Wage and Profit Controls Creates Unfair Results

Governments often limit supply by requiring licenses or permits, or by regulating growth. Doctors, pilots, utility workers, and broadcasters all need approval to work. These rules reduce competition. Intellectual property laws also limit supply by granting exclusive rights for years. In food production, quotas, subsidies, and trade rules restrict supply.

When supply is limited, prices and wages rise above free-market levels. If the government controls supply but not wages, benefits go to the top. This happens not because of productivity, but because competition is lower.

Maximum wages are essential, not optional. They help prevent government-created scarcity from concentrating wealth in the hands of a few.

Reason 2: Government-Created Markets Distort Bargaining Power

Today’s top-paying jobs are in markets that government policy carefully protects. Utilities, healthcare, defense, and food distribution often need permits, patents, or contracts. These closed markets limit broad participation.

Government control over entry gives some workers and executives too much power. They can demand higher pay that doesn't match their value or competition.

If the government controls supply and shapes the job market, it should prevent abuse of its design. A maximum wage and profit can balance power between the public and those the government protects.

Reason 3: Public Authority Justifies Public Limits

The government justifies intervention for the public good. It helps manage prices, encourage innovation, ensure safety, and stabilize markets. These goals depend on public authority and trust.

When systems offer a few exceptionally high wages, trust collapses, and rules benefit only the wealthy. Governments must set fair wage limits in every protected field.

This is not a call for equal pay for all. Government power must never allow unlimited private profit.

Putting it all Together

Governments have limited labor or supply to keep prices and profits high.

In manufacturing, limits can occur with:

Semiconductor imports
Car production rules
Building permits
Zoning laws
Energy equipment licenses
Defense contracts for approved companies

Governments limit doctors in medicine. They cap medical school seats, residency spots, and licensing. This raises wages. In farming, governments sometimes pay farmers to destroy crops or reduce livestock to keep prices from dropping. Governments often create scarcity for reasons like safety, stability, or national interest. This leads to higher earnings for those allowed in.

Counterargument: Wage Caps Hurt Talent and Innovation

Critics argue that maximum wages will repel talent and stifle innovation. They maintain that top performers will leave if pay is restricted.

This argument assumes that high pay or profit equals high value. In many government-controlled markets, wages and profits are high. This isn’t due to better performance; it’s because competition is limited. Maximum wages and profit do not dampen motivation; they just remove excess.

Innovation needs strong systems, resources, and public infrastructure. The government must provide or regulate these. Wage caps are essential; they guarantee high pay while preventing extremes that corrode fairness and trust.

Conclusion

When the government controls prices, licenses, supply, or intellectual property, markets are not really free. Unlimited wages and profits in these systems are unfair. If the government shapes markets, it should also control profits and earnings. Maximum wages help make sure that public power benefits everyone.

For something different:

https://www.quarkstochlorophyll.blog/capitalismandscarcity/

https://www.quarkstochlorophyll.blog/reservearmyoflabor/

References:

https://en.wikipedia.org/wiki/Pilot_certification_in_the_United_States
https://www.oecd.org/content/dam/oecd/en/publications/reports/1998/09/competition-policy-and-intellectual-property-rights_95bce645/49d5957f-en.pdf
https://en.wikipedia.org/wiki/Sugar_industry
https://www.brookings.edu/articles/a-taxonomy-of-supply-shocks-and-their-effects-on-inflation/
https://www.niskanencenter.org/cost-disease-socialism-how-subsidizing-costs-while-restricting-supply-drives-americas-fiscal-imbalance/
https://www.sciencedirect.com/science/article/abs/pii/S0927538X23001464
https://www.whitehouse.gov/presidential-actions/2026/01/adjusting-imports-of-semiconductors-semiconductor-manufacturing-equipment-and-their-derivative-products-into-the-united-states/
https://arxiv.org/abs/2505.09128
https://arxiv.org/abs/2408.04508
https://www.cato.org/commentary/problems-price-controls