Come now, you rich, weep and howl for the miseries that are coming upon you. Your riches have rotted and your garments are moth-eaten. Your gold and silver have rusted, and their rust will be evidence against you and will eat your flesh like fire. You have laid up treasure for the last days. Behold, the wages of the laborers who mowed your fields, which you kept back by fraud, cry out; and the cries of the harvesters have reached the ears of the Lord of hosts.
Strong words indeed, and made all the more powerful in that their author is the Holy Spirit, speaking through the Apostle James (James 5:1-4). It’s a reminder that God takes questions of fair pay seriously. This isn’t just a political or economic question: it is first and foremost a moral one. But what makes for a just wage? Obviously, it’s immoral to defraud workers. But other than that, are there any restrictions, or should we just let the market decide?
Typically, the discussion of this question takes place something like this. One side will claim that the government should set mandatory minimum wages, to ensure everyone is making a certain amount. The other side will say that wages should instead be determined by free markets, on the assumption that this will produce a fairer wage without needlessly driving up costs.
So, for example, Mark Perry at AEI argues that market-based wages are better in part because they “are based on the unique market forces of supply and demand for entry-level workers that prevail in an individual geographical location and for a specific industry.” In this view, if you want to find a just wage, just let the markets decide. If an employer is willing to pay $12/hour and an employee is willing to accept that pay, then $12/hour is a just wage. In an editorial for The News-Press (the local paper in Fort Myers, Florida), Bob Russell writes that the minimum wage law is “one of the worst things that government has ever done” because:
It’s often said that people can’t live on $7.25 per hour as a reason for increasing the minimum wage. Of course, we all wish that everyone could make more, but it is not up to us or even the government to say what people should be paid. It must be left to the free market, because the market is the true measure of someone’s real economic value.
One of the major problems with this idea is that it presupposes that the employer and employee are equally powerful (and thus equally free) negotiators. Bloomberg News’ Noah Smith has pointed out that immigration and minimum wage laws haven’t had the effect that a strict supply-and-demand model would suggest, suggesting that the model doesn’t actually work in practice the way we imagine — and are told — it would. (Basically, the supply-and-demand model assumes that mass immigration would dramatically lower wages, and that minimum wages would dramatically decrease demand for minimum wage work, but the truth is more complicated). One reason for this is that:
New evidence is showing that employers have more market power than economists had ever suspected. Two papers — the first by José Azar, Ioana Marinescu, and Marshall Steinbaum, the second by Efraim Benmelech, Nittai Bergman, and Hyunseob Kim — find that in areas where there are fewer employers in an industry, workers in that industry earn lower wages. The two papers use very different data sources, look at different time periods and different geographical units, and use different statistical methodologies. But their findings are completely consistent.
Why does this relative inequality in bargaining matter? Think about it this way. Let’s say you’ve got a total monopoly on a good or service that everyone needs. That’s an extreme example of a bargaining inequality. Everyone needs your product, and so you can charge however much you want. But now suppose that a competitor enters the field, producing the same good or service. Prices will drop — you can’t get away with just charging whatever you want — even though the product itself is no less valuable or necessary. The earlier high price wasn’t due to the “economic worth” of your product being so high, but due to unequal bargaining power.
This problem of unequal bargaining power (although borne out by the latest data) is one that Pope Leo XIII recognized back in 1897 in the encyclical Rerum Novarum. He presents it as a response to the sort of “let the markets decide” position that groups like AEI still hold over a century later. Here’s the free-market argument, as Pope Leo presents it:
Wages, as we are told, are regulated by free consent, and therefore the employer, when he pays what was agreed upon, has done his part and seemingly is not called upon to do anything beyond. The only way, it is said, in which injustice might occur would be if the master refused to pay the whole of the wages, or if the workman should not complete the work undertaken; in such cases the public authority should intervene, to see that each obtains his due, but not under any other circumstances.
That’s not good enough, says Leo. Why not? Because labor is both personal and necessary. So while the company could decide to simply leave a position permanently vacant, an employee can’t just permanently decide not to have a job. That, of itself, makes the bargaining table unequal, and it doesn’t even consider additional factors, like the relative economic power and commercial knowledge of a corporation vis-à-vis a job-seeker.
But this has another implication, as well. Authentic human needs give rise to human rights. For example, if someone cuts you off from all food and water, they’re violating your human rights because you need access to food and water to survive. Because work is necessary for survival, this necessity creates certain rights. As the pope explained, “the preservation of life is the bounden duty of one and all, and to be wanting therein is a crime. It necessarily follows that each one has a natural right to procure what is required in order to live, and the poor can procure that in no other way than by what they can earn through their work.” In other words, you have the need (and therefore the right) to make enough money to live.
That doesn’t mean that Pope Leo XIII would necessarily endorse something like federally-mandated minimum wage laws. Mark Perry argues against “government-mandated minimum wages” on the basis that they “are set arbitrarily based on political considerations,” and Leo actually raises a similar concern:
Doubtless, before deciding whether wages are fair, many things have to be considered; but wealthy owners and all masters of labor should be mindful of this – that to exercise pressure upon the indigent and the destitute for the sake of gain, and to gather one’s profit out of the need of another, is condemned by all laws, human and divine.
And so the pope isn’t arguing for either a federally-mandated minimum wage or simply letting the markets decide a person’s “economic worth.” Instead, he argues for a free market solution within certain moral parameters:
Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner. If through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice.
So maybe you’re so much more powerful (or knowledgeable, or clever) than your employees, and can get away with paying them peanuts. That’s still immoral.
Leo’s position is a wise and nuanced one, recognizing both the evils of socialism (which is expressly rejected in the document) and that the appeal of socialism is in no small part because of corporate greed. The solution is to respect private property while calling on business owners to pay just wages. So what does a just wage look like? Pope Leo has already answered — it must be sufficient “to support a frugal and well-behaved wage-earner.” The pope expounds on what this means (and why it matters):
If a workman’s wages be sufficient to enable him comfortably to support himself, his wife, and his children, he will find it easy, if he be a sensible man, to practice thrift, and he will not fail, by cutting down expenses, to put by some little savings and thus secure a modest source of income. Nature itself would urge him to this. We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners.
At the heart of this is a profound truth. The so-called “free-market solution” commodifies the person (hence claims like “the market is the true measure of someone’s real economic value”), and government-mandated wages typically treat everyone (or nearly everyone) as a faceless mass of wage-earners. But in truth, each worker is a unique creature made in the image of God, and their worth exceeds their “economic value” to the market. This vision of employment eschews a one-size-fits-all solution, and shifts the whole question from “what’s the cheapest price at which I can get your labor” to “what are your needs as a human being, and what are your particular family needs?”
So, if you’re an employer (and Church employers aren’t exempt from this!) and your full-time employees can’t comfortably support themselves and their families, you’re not paying them enough. Human beings should be able to work and raise a family (even a big one!), and a system in which they can’t is operating unjustly.
I wonder how the decision about what constitutes a fair wage is affected in our current economy, where it is expected that both parents are working, and things like mortgage size are based on the assumption that every household has two wage-earners. Is it just and fair to set wages at a point that necessitates both adults working? This is based on the assumption that there is no value to society, or the family, in having one parent home with the children, which is essentially to say that the task of raising children and keeping a home (which of course has largely fallen to women in the course of history) has no value. I find this to be denigrating of women almost to the point of misogyny, but it seems to be the prevailing viewpoint in today’s American market/society.
I agree. The role of motherhood is terribly underrated in our society and our children will pay for it.
There are four sins crying to Heaven for vengeance and all four sins are the public policy of this Evil Empire, America, and all four sins are the favored objects of positive law in this Evil Empire, America.
Willful Murder (Abortion, Unjust Wars, Drones, Assassinations)
The Sin of Sodom (So-called Gay marriage, the acceptance of sodomy as permissible and praise worthy)
Oppression of the Poor (Usury, which is state-sponsored theft of labor).
Defrauding Laborers of their Wages (Mass immigration which undermines the wage scale, closing manufacturing in America and relocating it overseas to be done by slaves)
Thank you, Joe, for this excellent post.
Here are some links worth reading to get the Catholic perspective on this dismal silence.
http://www.culturewars.com/2005/Ederer.html
http://www.culturewars.com/2010/Weber%20Thesis.htm
http://www.culturewars.com/2010/Oinkonomics.htm
http://www.culturewars.com/2014/Strangled.htm
http://www.culturewars.com/2014/Health.htm
A well known popular priest (he has an online blog) promotes the work of Father Sirico of The Acton Institute (a front for Midwestern Calvinists) but Fr. Sirico is to Catholic Economics what Madonna is to chastity.
Fr Heinrich Pesch, S.J. is the epitome of a Catholic Economist but he is virtually unknown in American Catholicism which illustrates just how successfully the enemy has cultivated the American mind of Catholics
https://www.scribd.com/doc/105782019/Rupert-J-Ederer-Solidarism
There’s theory and then there’s reality. Theory always loses when it runs into realty. For instance, what does it mean for a full-time employee to live comfortably? There is the single employee and the employee who has a large family. Both work the same job with the same hours and are paid the same wage. Is there injustice in the wages paid to each in the case where the single employee has a comfortable lifestyle while the employee with the large family does not have a comfortable lifestyle because of their lifestyles? In theory, it would be best if the employer paid the employee a wage that supported the employee in the lifestyle they were in. In reality, the employer would be sued for discrimination in the wages paid his employees based on what their lifestyles are. No economic system is perfect but one is much better than the others as far as just wages are concerned. And in that system, a just wage is determined by many different factors in the particular economic area. If the employee does not like the wages, he is free to move about and find an area that pays, in the employee’s opinion, a just wage to live a lifestyle he finds comfortable.
I don’t think it would be fair to the employer of a “minimum wage” establishment such as McDonald’s to have to pay a high rate to someone just because they have x number of children or because they require x$ to make a living. The salary should match the skill, effort and education of the position. I also don’t see how it’s fair to an employer to pay two different people different wages who would otherwise be equal except for the fact that one has kids and the other doesn’t (or one has more kids than the other).
Good point. What’s ironic is the main article’s “just wage” concept sounds quite like social welfare (which actually gives you more money per child).
Presumably, in the century since Rerum Novarum, much more has been written about how we can balance capitalism’s “fat cat” problem without stealing everyone’s property or imposing blanket wages everywhere. I agree, Prima Facie, with the commentators’ initial criticisms, that we can hardly expect McDonalds to pay its cashiers 50k/year in the Midwest… but that’s such an inevitable critique, I know it’s been answered already somewhere. Got any book related book recommendations so anyone interested can delve deeper into this topic?
It’s still a pressing issue for us. The “Capitalism versus Socialism” dichotomy has grown so boring.
A just wage is certainly owed for an honest day’s labor. Labor includes everything the worker brings to the table–just as a wage includes fringe benefits. This issue is complex. The worker represents only one side of the equation. The employer is the other side.
In an ideal world, a worker receives a just wage while the employer receives a just day’s work. In an ideal world, the worker would not bring to his job such attitudes, traits or vice as dishonesty or laziness, lateness, or the leftover hangover. Ideally the worker is prudent and frugal and his wife is the same, so the family may be blessed by even a small fair wage. ( I grew up poor, in a working-class community. Some families prospered even with large numbers of children. Other families suffered from a father who drank or a mother who didn’t know to cook, to sew, to plant or to can, or to economize).
Workers and employers are in relationship; both operate as part of a larger community. Both have individual as well as social problems, and all are brought to the table. A hodgepodge stew results. One bowl may be full of meat while another holds gruel.
The article is right. When I owned a shop, I honestly sought to pay my mechanics as much as humanly possible….
The pay still sucked…but I wasn’t making money either LOL
A few comments:
1. It is indeed a myth that the employer and employee are equally powerful. However this is caused by over-regulation and not the free market. Only large companies can survive in an over-regulated business environment which pushes out the smaller businesses and make the employees less powerful.
2. Two papers found that in areas where there are fewer employers in an industry, workers in that industry earn lower wages.
The question I’d ask is why these areas have fewer employers? Perhaps wages aren’t lower because there are fewer employers per se, but rather because there is over-regulation and other laws which drive up costs and push out small businesses. So yes, fewer employers and lower wages are correlated, but the cause of this sad situation is government.
3. “So while the company could decide to simply leave a position permanently vacant, an employee can’t just permanently decide not to have a job.”
Not necessarily true. It’s true if you compare a large rich company to a poor unskilled worker, but there are small businesses out there struggling to survive and employees who take a year off work to go on holiday or “find themselves” or some other reason. All this talk of just wage seems to apply to large employers who have almost unlimited funds, but let’s not forget about the small employers who also have families of their own to support and struggle to pay the bills every week, not to mention take huge risk upon themselves. These small employers don’t have the luxury of employees – they don’t have paid sick leave, recreation leave, employer-provided insurance, or a steady job.
4. The pope “argues for a free market solution within certain moral parameters”
Which is exactly what thin libertarians like Lew Rockwell and Tom Woods (both Catholics) advocate for {https://www.lewrockwell.com/2014/05/lew-rockwell/the-future-of-libertarianism/}.
5. Pope Leo: “If through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice.”
I think this is very one-sided. Both have responsibilities. An Employer should treat his employee well (to the best of his ability), but employees shouldn’t treat their employer as a charity. If you can’t afford another child on your current wages, it’s probably a sin of irresponsible parenting to have another and expect the family of your boss to pay for it.
This implies that for an employer who is forced to cut costs out of necessity to sustain his business and support his own family, it would be moral to fire his employees instead of offering them reduced pay.
6. “So maybe… [you] can get away with paying them peanuts. That’s still immoral.”
It’s interesting how paying workers nothing at all (volunteer work) is somehow moral but adding a little financial incentive that doesn’t quite exceed the minimum (or just) wage suddenly makes it immoral. If it’s ok to pay nothing for internships and volunteer work (remember, these workers may still be gaining valuable experience and skills), it shouldn’t be immoral to pay them an additional $2 per hour.
7. A just wage must be sufficient “to support a frugal and well-behaved wage-earner.”
This makes sense if you include the whole state. For example, a worker with few skills and a large family may have to put his frugality to use and move to a town with lower housing costs. It’s pointless to talk about a “just wage” in an expensive city like New York for example. If he can’t afford it, he should move out.
8. “Human beings should be able to work and raise a family (even a big one!), and a system in which they can’t is operating unjustly.”
A system which taxes and over-regulates the economy, driving up costs prevents large families from supporting themselves. In a free market there’d be countless ways a family could earn some extra money on the side, such as making lunches for children on their way to school. Unfortunately this is illegal in today’s economy without a permit and costly food licences.
Employees also have responsibilities. Come on, if you plan to have a big family, invest in yourself and develop your skills. Don’t expect to make $400k working at McDonalds.
It’s easy to blame the employers for the problems of the employees, but as I see it, both can be at fault. As you said above, “the truth is …complicated.”
Thank you for your analytical comment. The issue is certainly complicated. So here’s my own current ethical dilemma:
My son and I volunteer one day/week, without pay, at a local nursing home/assisted living facility. We assist with recreational/enrichment activities (music, crafts, reading, singing, exercise, etc.). The staff person under whose direction we work, will take a leave of absence from her job in order to travel with her ill husband to another country so he may receive medical care; said medical care here would require their going broke and going onto Medicaid–giving up all personal property.
The owners of the facility will not fill the staff position. The staff person has asked me, on behalf of the residents, to volunteer to replace her, in essence, for as many hours as I can provide, while she is gone. On behalf of the residents, I feel an ethical pull to do so. At the same time, I have resentment at being put in such a position. On the sidelines are additional health care worker/aides (earning an average of $12-15/hour) who sit, showing no signs of life until emergent situations arise.
What would Mother Teresa do?
You’re being paid $0. $0 < Minimum wage. Therefore you are a victim of injustice. 😛
You are absolutely correct in one sense. OTOH, aren’t Christians supposed to work against injustice?? 🙂
“So, if you’re an employer (and Church employers aren’t exempt from this!) and your full-time employees can’t comfortably support themselves and their families, you’re not paying them enough. Human beings should be able to work and raise a family (even a big one!), and a system in which they can’t is operating unjustly.”
Hogwash. Absolute hogwash.
You’re venturing into the realm of “pay for my birth control” types because it’s about “health.” Having sex and not having kids is a personal choice. Having sex and being open to life is also a personal choice, though the most natural one out of the two. An employer is not “married” to the employee where he meets his in-laws, their cousins, and dear friends. He makes a contract with the employee solely. Only sharing healthcare plans is when a spouse or a child steps one step close to the employer.
A “just wage” is paying the same amount to Person A as Person B received for the same work and duration as contracted under the same employer.
You also leave out the simple fact that an employer doesn’t have an endless amount of cash in their budget that goes towards salaries.
If you don’t like the pay, leave and find another job. If the owner (s) are Catholic the bishop should tell the owner not to be unjust. And if they refuse tell the Catholic workers to stop working there. And tell the laity not to do business with the company.