This is the very heart of the difference between capitalist and socialist systems. Socialist nations have always quickly become economic basket cases, for the simple reason that they kill individual initiative by setting a ceiling on compensation. No matter how hard someone works, he or she earns what is determined by the state.
In a capitalist society, an enterprising person can take another job or work longer hours so as to earn more money, and then what he or she does with that money is largely a matter of the worker’s own discretion.
In a socialist society, by contrast, it’s useless to work long hours or take an extra job, because doing so isn’t going to bring in any more cash: the government will skim off any “excess compensation” that might have been due a hardworking person. And there isn’t even any impetus to work hard or do a good job, because one can’t get fired and suddenly be left without any means of support, either.