> Obviously it's one we should avoid.You can't. You don't get to dictate what something costs.
> we stop paying people at the top literally millions of times as much money as the people at the bottom
You can't do this either unless you own stock in the company and can vote on the compensation it pays.
> An easy way to do this would be to cap income of the top earners in a company at, say, 1,000 times income of their lowest-paid workers.
And watch all your innovators and wealth creators go away along with all the parasites.
PG nailed this years ago in his essay on inequality. He said there are two ways for someone to get rich: by making something people want (wealth creation and innovation), or by gaming the system. Any "fix" for inequality that attacks the first and second kind of person indiscriminately, as your proposed rule does (how do you know whether the top earner at a company is that way because he gamed the system, or because he is using the enormous leverage of productivity tools--like, oh, just to pick one at random, computer programming--to actually be that much better at making something people want?) will just impoverish your country: yes, people might be more equal, but only because they're now all equally poor.
> Neither of the solutions you propose work
I didn't propose either of them in isolation. I proposed both of them together.
> CEOs will just pat themselves on the back for increasing productivity, lay off the no-longer-needed workers, and pay themselves more. There's no incentive for them to pass on any of these profits to their workers.
There is if the workers aren't employees, which is what I am proposing. See below.
CEOs only have the ability to get away with what you describe because "workers" think of themselves as "workers"--they think "all I want is a fair day's pay for a fair day's work". And just by thinking that way, they give up all of their bargaining power. Basically, what they're asking is for someone else to take all of the business risk--what's a "fair day's pay for a fair day's work" if nobody wants to buy the product?--yet still want to share in the same upside. But upside and risk go together: if you want more upside, you need to take more risk. That's what entrepreneurs have to do. You can't have it both ways.
> I get the feeling that's not what you're actually proposing.
You're wrong. Something like a taxi driver starting his own company is exactly what I am proposing. But I am proposing it for all workers, not just taxi drivers. For example, under what I am proposing, there would be no such thing as an assembly line worker in an auto plant: every one of those workers would be an owner (or part owner, if a bunch of them got together) of a company that sold the service of assembly line labor.