Justice and the Living Wage

Justice and the Living Wage

My wife and I homeschool our children, which means we get a great deal of control over what they are taught—the materials used, how subjects are presented, etc. We use a Catholic program that offers online classes as well as recommendations for textbooks and the materials for classes we teach ourselves. We’ve used this program for years now and are pleased with it. However, recently I was reviewing a religion lesson with my high-school daughter, and I came upon a section that was problematic: the “living wage.”

Here is what her textbook (which is excellent in many ways) said about a living wage:

What does man need to preserve his right to life and to live with dignity? the basic needs are clear: food, shelter, clothing, medical care, education, recreation, transportation, savings (to provide for long-term needs, illness, retirement, and similar needs). The amount which meets these basic needs is called a living wage

Let’s take a hypothetical case. Over at the local big corporation there are two men who do exactly the same kind of work. Joe Cool, a bachelor, has no dependents, lives in a condominium, drives a sports car, and has a St. Bernard dog. The other is Mr. Jones, who has a house in a development, a wife and six children, and drives a station wagon. Both men, as we said, do exactly the same kind of work. Let’s further hypothesize that they have the same education, the same experience, the same competence, and the same dedication to the company. Does justice demand that each be paid exactly the same amount? No. Federal government regulations may insist they be paid the same, but this is not in justice. An employer has an obligation to pay a man enough to support himself and his dependents. This is consistent Church teaching.

(Following Christ in the World, Anne Carroll, Seton Press, p. 39)

Playing with Emotions

Okay, I’m not sure where to start because there are so many problems with this analysis. (Before I continue, I want to mention that our homeschooling program also assigns Economics in One Lesson, which is the best economics textbook available today and would also take issue with this explanation.) Note first that it uses highly emotional language. We are supposed to picture the first employee, “Joe Cool,” in an unsympathetic light. He’s obviously just a selfish hipster who doesn’t care about anyone but himself. He probably wears $500 shoes and dines at fancy restaurants every night. Mr. Jones, on the other hand, is a working stiff trying to heroically support his big family (note that most students using this textbook likely come from large Catholic families). Also, it’s a “big corporation” we’re talking about, which suggests it’s cold and callous. In reality, most businesses are small or medium-sized companies, who bear the brunt of most regulations enacted, but that wouldn’t make the story as sympathetic to Mr. Jones. Such emotional language does little to seriously and dispassionately address the issue at hand.

What is a “Basic Need”?

The problems continue with the book’s definition of “basic needs”: “food, shelter, clothing, medical care, education, recreation, transportation, savings.” The first three needs seem pretty obvious, but after that we face some issues. What is included in “medical care”? Most likely emergency services, but what about other services, such as a nutritionist, or cosmetic surgery? Who determines if a service falls under a “basic need”? The employer, the employee, the government? You could ask similar questions for the other categories as well: what level of education meets one’s “basic needs”? High school, community college, a university degree? Public school or private school? You even face the issue with the needs of food, shelter, and clothing. Who determines what the minimum amount of these needs is considered “basic”?

Justice for All?

Now let’s look more closely at the specific hypothetical situation given. It’s clear that both workers provide the exact same service to the company, yet supposedly justice demands the company is obligated to pay Mr. Jones more than Joe Cool. The whole focus is on justice for Mr. Jones, but the textbook forgets there are other actors in this economic drama. What about justice for them? Let’s look at each one in turn.

The Other Employees (“Joe Cool”): How is it justice for Joe Cool to be paid less for the exact same work that Mr. Jones is doing? Joe presumably works just as hard and as well as Mr. Jones, yet because of his living situation—which is unrelated to his work—he receives a lower wage. This would be like a grocery store charging different amounts for ground beef depending on a customer’s marital status and number of dependents.

The Employer (“Local Big Corporation”, aka “LBC”): Here is where things get really convoluted. In this scenario, LBC has to pay more to one employee than it would to another for the exact same work. Let’s think this out a bit more.

Let’s say companies are required to set wages based on the living situations of its employees (which is what this textbook seems to want). When LBC is hiring, and the choice is between a person with no kids and one with six kids, who do you think it will hire? Obviously, the one that it doesn’t have to pay as much. So Mr. Jones is less likely to get hired than Joe Cool—how is that justice for Mr. Jones? (Note: this is why minimum wage laws are flawed. They keep the very people who need entry-level jobs priced out of the workforce.) Such a requirement would make it harder for Mr. Jones to support his family, not easier.

More importantly, how exactly does LBC determine a “living wage”? Is it based on number of legal dependents? What if Joe Cool is from Venezuela and he is sending part of his paycheck home to his disabled brother who has eight kids he can’t support? These family members don’t show up as dependents on Joe Cool’s tax form, but nonetheless they are depending on Joe as much as Mr. Jones’ children depend on him. Yet LBC won’t treat Joe as worthy of a higher wage like Mr. Jones. Is this justice?

LBC (or more likely the government) is put in the position of determining everyone’s appropriate “living wage.” But there are so many factors involved that it’s simply impossible for a company, or even a government, to do so. Determining what is truly a basic need for each person and family (public or private school for kids?, a single-bedroom house or a four-bedroom house?) is a recipe for ineptitude and corruption.

And remember, in many cases we aren’t talking about a “big corporation” being impacted, we are talking about a small business, often run by a family. That family might also have six or more dependents. Is it justice that they are forced to pay more than market rate, thus potentially harming their ability to meet their basic needs? (Many small businesses run with very tight margins.) What about justice for that family’s dependents?

The Customers of LBC: The problems of the living wage keep extending outwards into the economy. If LBC is forced to pay more than market rate for Mr. Jones’ services (assuming they hire him in the first place, of course), then it needs to make enough money to do that. That means it needs to raise its prices. Let’s say LBC provides one of those “basic needs” listed above, like food. Now, because of this “living wage” requirement, food for all of LBC’s customers just got more expensive, and their customers’ wages might not be enough to pay for food now. So, will all other companies in the area need to increase their wages to match the new “living wages”? If they do, then we’ll have a vicious cycle of increasing wages followed by increasing prices followed by increasing wages. That way lies economic disaster.

Balancing Act

The challenge for a just economy is balancing the needs and desires of thousands, even millions, of people. Whenever focus is placed on justice for one group of people, inevitably that results in injustice for others. Yet usually the “others” are forgotten or ignored. True justice takes into consideration all parties involved in an economy, not just the ones who might be the most visible or the most sympathetic.

I’m disappointed that an otherwise solid religion book is so wrong about the issue of a living wage. However, I’m not surprised. When it comes to economics, many otherwise intelligent people fall for emotional arguments that sound just on the surface, but ultimately bring about more injustice than they claim to solve.

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