Political campaigns oversimplify issues, and this year seems no different. As a reminder that solutions to complex social problems are not typically simple or straightforward, I want to explore some of what it would take to pay a just wage (a kind of complement to my earlier post on what it would take to feed the hungry).
While the unemployment rate slowly drops, it seems as if those returning to work are earning less money (as David Cloutier noted in his last post). Because the Catholic faith is founded on a messiah who preached good news to the poor (Luke 4:16-19) and promised the poor the kingdom of God (Luke 6:20-21), it has a history of thinking about how to address poverty, one part of which is paying a just wage for work.
To summarize the Compendium of the Social Doctrine of the Church, 302, and Laborem exercens, 19, a just wage:
- is given in due time and in proportion to the work done
- must not be below the level of subsistence
- furnishes the means to cultivate worthily the laborer’s material, social, cultural, and spiritual life and that of his or her dependents
- is first the responsibility of the employer but then also of the economic system as a whole
What would it take to ensure a wage is just?
Businesses must pay fairly for the work that is done. Obviously, the current minimum wage is not enough to support a family. As a crude estimate, $7.25 an hour at 40 hours a week for 52 weeks a year comes out to a little over $15,000 a year. Yet, the solution is not a simple minimum wage increase.
- According to the Bureau of Labor and Statistics, people who typically earn minimum wage are unmarried teenagers working part-time in the service industry. Given this reality, it is not surprise that many economists do not believe that raising the minimum wage actually helps the working poor. The two most prominent reasons are: 1) raising the minimum wage typically prices out unskilled workers who most need the work and the job experience and 2) raising the minimum wage typically fails to address the needs of full-time workers, less than 3% of whom earn at or less than the minimum wage.
- Moreover, trying to address differing personal and family needs in the work place is difficult. Difference in pay, even if justified, often results in discord in the work place, an aspect of what is know as relative poverty. It also presumes a level of disclosure of an employee’s personal life to employers that would make both employees and employers uncomfortable.
Even though businesses tend to pay more to full-time workers and heads of households typically make more than the minimum wage (see the Bureau of Labor and Statistics statistics again), this does not mean that wages are just. Rather, it means that businesses provide wages “in proportion to the work done”, do so frequently above “the level of subsistence” for full-time workers, and are thus fulfilling the primary “responsibility of the employer” to pay the just wage. Still, this achievement of most businesses does not guaranteed that everyone has enough to live on, have access to the goods of society, or that the economic system is just. These demands seem to go beyond what can be expected of a business. So . . .
Government needs to foster just wages. Its work is not primarily the payment of wages but to ensure that “the economic system as a whole” supports the payment of a just wage. If it does this well, those who are working have a better chance of cultivating their and their dependents “material, social, cultural, and spiritual life”. While there are countless ways that government can help foster just wages in the economic sector, there are two functions that seem readily apparent.
- Operate a judicial system that protects the rights of all. Businesses that “employ” others below subsistence wages, do not honor the protection of workers written into our law codes, and take advantage of immigrants and other vulnerable populations should be prosecuted. If effective and fair, a justice system will deter these wrongs and foster businesses that pay their workers justly.
- Develop a tax system that supports wage earners. In the United States, perhaps the best example is the Earned Income Tax Credit, “a benefit for certain people who work and have low to moderate wages . . . [that] . . .reduces the amount of tax you owe and may also give you a refund.” This tax credit helps account for the different situations of employees—their overall income and the number of dependents for example—and thus helps the wages paid by businesses to become more just either by lowering the taxes on the wages or even supplementing it with a refund.
Even with this work toward just economic system that cooperates with businesses to pay just wages, there will still be workers, even full-time workers, struggling to have access to the goods of society. So . . .
The Church must continue its work on behalf of the poor. Like the government, the church is not primarily responsible for paying wages. Its role is to help make the economic system as a whole favorable to workers and their dependents so that they can live a life with physical and spiritual dignity. The church acting as a whole body and acting through its individual members does amazing work to this end. Part of what the Church does to foster just wages is that it:
- Preaches Jesus’ message of love of God and love of neighbor, so that those in the pews, rather rich or poor or somewhere in between, are active in living out God’s will by attending to the needs of others.
- Provides direct service to those in need. Catholic hospitals, catholic schools, and Catholic Charities are just a few examples of this type of work.
- Advocates within our society to ensure an economy that protects “those most in need wherever they might live on this globe” and is measured by “how the poor and vulnerable are faring”.
While more is needed to secure just wages, it is hard to imagine less than what I have sketched here. Thus, to provide a just wage (or to address any one of a number of our social issues) entails:
- Cooperation of several institutions
- Attentiveness to what each of these institutions can and cannot do
- Coordination of these institutions based on this knowledge
While I hope this makes us all suspicious of simplistic solutions, I also hope it helps us to couple our love of others with the practical wisdom needed to do so effectively.
With all due deference to Laborem exercens, the claim that a just wage “must not be below the level of subsistence” is not a supportable condition. Specific work has a specific value and while it may not be possible to define the exact dollar value of a particular job it is possible to say that that value is a constant that does not vary with the needs of the person doing the work.
If it is fair to pay a high school student the minimum wage for working at a fast food restaurant then it can only be because that is the value of the work … regardless of who performs it. It is the nature of the job that determines its value and that should determine the level of pay. To suggest that the needs of the worker should determine the pay is to suggest a wage structure that would be quite literally impossible to implement without horrific unintended consequences. So long as the concept of need is included in the term “just wage” I am pessimistic about the possibility of ever coming to an understanding of what that phrase really means.
In the contemporary U.S.economy , the discussion of a “just wage”–let alone a “living wage”–seems utopian. Employers–including Catholic universities, hospitals,, social welfare agencies, etc.,–strain to pay their hourly employees the “prevailing wage.” Though worker productivity has increased over the past 20 years, “prevailing wages” unfortunately have stagnated.
Are we passing through a temporary cycle when hourly workers must accept a diminished share of capitalism’s cornucopia? Or are hourly workers facing a harsh future as our national economy adjusts to enhanced international competition, technological innovation and a transition to a low-wage service economy?
In this economic environment how can we place the moral burden on the individual employer to pay a “just wage?” Isn’t the “prevailing wage” the most we can expect? In fact, aren’t employers increasingly dependent on their fellow taxpayers to supplement the inadequate “prevailing wages” they pay?
There are 26 million Americans now receiving the Earned Income Tax Credit (EITC) and 46 million receiving food stamps (SNAP).
From the perspective of Catholic Social Thought, these subsidies to low-income workers are admirable. But these policies underscore that the functioning of the U.S. economic “machine” currently depends on continually squeezing “labor costs.”
In such a universe, the discussion of the moral obligation to pay a “just wage” seem, at best, utopian.
jpfarry
Thanks, Jason, for posting on this. Ender – there is no purely mechanical way to determine the “value” of the labor input to production. It is a human decision on allocation – if you command pricing power in the market, you can raise your workers’ wages. Hence, Apple store retail workers earn more simply because Apple has strong pricing power over its product. Companies also make human decisions about, e.g., how much each person along a hierarchy gets paid. There is no way to suggest that a standard worker today is somehow work multiple times “less” compared to a CEO than 30 years ago. You are right to say that there are such things as “uneconomic” wages – you can’t pay certain wages if it makes you unable to support other necessary inputs for the products, and if you end up having to charge prices that people won’t pay. But those are guardrails, not an absolute calculation. Costco famously pays its retail workers $3-4/hour above the typical discount retail wage, and it does so partially by accepting a lower profit level (not no-profit, but less profit). They are a robust business.
The question of whether this is “utopian” could also be thought of in reverse: is it utopian to believe that you can constantly pay workers a sub-subsistence wage and maintain aggregate demand in an economic system, without relying on debt (of all sorts) to fill in the difference? We know that over the long run in the aggregate, this is not possible – we can only do it now by running high levels of consumer and government debt to make up the shortfall in demand – and also by outsourcing labor and running a constant trade deficit, which is also more or less a debt problem that comes due at some point. This is not ultimately an issue that can be solved by a single employer – it requires cooperation, of the sort you have in the German economy, where workers, corporations, and the government negotiate sustainable wage and price levels, where people save (instead of running personal debt), and where there is a constant trade surplus. Wages and prices ultimately have to be managed for macroeconomic order, or else you simply will not avoid economic (debt-driven) boom/bust cycles.