The Minimum Wage and Catholic Social Teaching
by Rev. Robert Johansen - April 3, 2007
Reprinted with permission.
When the Democratic Party gained control of Congress in January, as part of its "100 Hour" plan it quickly introduced legislation to raise the federal minimum wage from the current $5.15 per hour to $7.25 per hour. The partisan debate has been, in large part, predictable: Democratic advocates of the raise cite concern for poor and working families, and Republican opponents cite concern for the impact the hike may have on small business and overall employment. As of this writing, the legislation has passed both houses in differing bills. The minimum wage hike has an uncertain future as opponents wrangle over differences, and it faces a potential presidential veto.
Minimum wage laws are a fixture of economic life in the United States and most Western countries, and they have been around long enough that most people take them for granted. But since the 1980s and the rise of conservatism as a political force, many conservative or libertarian thinkers have called their legitimacy into question. On the other hand, the U.S. Conference of Catholic Bishops (USCCB) consistently supports not only minimum wage laws themselves, but usually advocates raising them. In its "Action Memo" for January 19 of this year, the USCCB urged passage of the minimum wage bill, citing Church teaching that demands a just wage for workers. The current debate about minimum wage laws presents an opportunity to explore several questions: What are the Catholic principles that should guide our thinking about wages? Does Church teaching tell us what the minimum wage should be, or even whether we should have minimum wage laws at all?
Advocates or critics of minimum wage laws often presuppose the answer to an important underlying question: Is it legitimate for the state to interfere with or regulate economic affairs, and if so, to what extent? Conservatives, in general, hold that government intrusion into all facets of human life, economic activity included, should be kept to a minimum: that the government should confine itself to policing against theft or fraud, to protecting workers from outright exploitation, and to enforcing contracts. This seems to be a correlative of the Catholic principle of subsidiarity, which stipulates that "a community of a higher order [such as the state] should not interfere in the internal life of a community of a lower order [such as a village or family], depriving it of its functions" (Catechism of the Catholic Church 1883). Some libertarians would push this idea even further, holding that almost any kind of contract entered into freely between responsible adults is legitimate, legally binding, and not subject to government regulation. And so, they would argue, even a contract between a prostitute and her customer, since entered freely, is perfectly legitimate and should not be prohibited by law.
But in the Catholic tradition, the state must, as the Catechism teaches, "defend and promote the common good of civil society, its citizens, and intermediate bodies" (1910). Furthermore, "the state has a responsibility for its citizens' well-being" (2372). Toward these ends, the state has a legitimate role to play in the ordering of economic life. For this reason, in his great encyclical Rerum Novarum, Pope Leo XIII wrote that, in the interest of resolving (or at least minimizing) the conflict between labor and employers, the Church maintains that "for this purpose recourse should be had, in due measure and degree, to the intervention of the law and of State authority" (16). Pope John Paul II elaborated on this teaching in Centesimus Annus, saying:
Economic activity, especially the activity of a market economy, cannot be conducted in an institutional, juridical or political vacuum. On the contrary, it presupposes sure guarantees of individual freedom and private property, as well as a stable currency and efficient public services. Hence the principal task of the State is to guarantee this security, so that those who work and produce can enjoy the fruits of their labours and thus feel encouraged to work efficiently and honestly (48).
It seems, then, that the state is justified in intervening in the economic life of its citizens in order to secure their rights and to promote the common good. By this rationale, a laissez-faire capitalist system, such as that favored by some libertarians, is simply not a licit option, nor would promoting such a system be consistent with the Catholic Faith.
The Worker Deserves His Wage
Since we've established that the state can intervene in the economy in order to promote the common good, the next question is, what is the teaching of the Church regarding the wages of workers? First, the Church observes biblical admonitions such as Deuteronomy 24:15:
You shall pay him [the hired man or servant] each day's wages before sundown on the day itself, since he is poor and looks forward to them. Otherwise he will cry to the Lord against you, and you will be held guilty.
In view of this passage and others, such as James 5:4, the Church has taught that depriving a worker of his just wages, whether by withholding them or failing to pay a just wage, is gravely sinful (CCC 2434), and in fact has called it one of the four "sins that cry to heaven for vengeance." This is the case, as Leo XIII wrote, because "the laboring man is, as a rule, weak and unprotected, and because his slender means should in proportion to their scantiness be accounted sacred" (RN 20).
Workers are due their wages as a matter of justice. The Catechism tells us that "a just wage is the legitimate fruit of work" (2434). But a just wage is not that which will merely provide sufficient food, clothing, and shelter. To live at a subsistence level is to live at the minimum condition of human dignity, and, as St. Thomas Aquinas wrote in the Summa Theologica, "No one is obliged to live unbecomingly."
A just wage, then, should provide a worker with enough to live, and perhaps a little more, so as to enable him to live "becomingly." The Church has, therefore, always desired that the worker not remain trapped at a subsistence level, but be able to better his condition: The degree of independence the worker gains by doing so increases his dignity, which is part and parcel of living becomingly. To obtain property, then, whether in the form of real property or durable possessions, is a principal object of every worker. The worker, by living "sparingly, saves money, and, for greater security, invests his savings," and has the "hope and possibility of increasing his resources and of bettering his condition in life" (RN 5).
Pope Pius XI, 40 years after Leo XIII, elaborated on this theme in his social encyclical Quadragesimo Anno, saying that by accumulating property, workers can emerge "from that hand-to-mouth uncertainty which is the lot of the proletarian. Thus they will not only be in a position to support life's changing fortunes, but will also have the reassuring confidence that when their lives are ended, some little provision will remain for those whom they leave behind them" (61). This principle led John Paul II to write that the accumulation of property is necessary "for the autonomy and development of the person" (CA 30).
Apart from the worker's own dignity, though, there is another practical reason to pay the worker a decent wage, which even the most hard-nosed capitalist could embrace: By becoming more substantial citizens, people are no longer plagued by the feelings of hopelessness and dispossession that often characterize the lives of the poor. A man with property has a stake in his community; he is rooted, as it were. A man with property is more inclined to look to the future and make provision for it. It is well-known that stable neighborhoods of homeowners have far less crime and other social problems than those otherwise composed. Just wages, then, by promoting the dignity and independence of the worker, lead to greater stability and cohesion in society.
What Is a Just Wage?
But how are we to determine the "just" wage? For economists, wages are the price that an employer must pay to obtain the labor of his employees. This price must be sufficient to overcome the "disutility" of labor (the human inertia tending against labor that must be overcome by sufficient motivation), and must take into account the relative ease or difficulty of the labor involved, as well as the relative abundance or scarcity of people in the labor pool who can perform the required work. Because of these factors, wages are, to a certain extent, governed by the same market factors that influence the price of goods.
For example, varieties of work calling for skills that are rare or acquired only with long periods of training (such as neurosurgery or nuclear engineering) tend to pay high wages, whereas varieties of work that call for few skills or skills that are relatively common (like landscaping or washing dishes) tend to pay low wages. Varieties of work that may not be intrinsically difficult but are unpleasant (such as sanitation work) are frequently well-paid.
However, wages are not solely governed by "market" factors. People can, and often do, work for reasons beyond simple economic utility. Missionaries and those who work among the poor submit themselves to great privations and hardships in order to serve God and their fellow men. People in the military frequently acquire highly valuable and rare skills, yet soldiers are almost never well-paid. But they willingly offer their services, usually out of a sense of patriotism or duty to their country.
Because of the great variety of work people do, the scarcity or abundance of different skills, and the non-economic factors that influence the kinds of work in which people choose to engage, it is not possible to propose any kind of formula or rule by which one may calculate a universal just wage. Furthermore, differences in local conditions influence what may be considered just. A salary of $50,000 a year might be considered quite comfortable in one part of the country, whereas somewhere else such a salary might be considered only adequate.
The Church recognizes this reality, and acknowledges, as Leo XIII did in Rerum Novarum, that many factors must go into determining whether wages are just.
One method advanced by 19th-century economists for determining wages was the "value-added" theory. Under this theory, an employee's wages are determined by calculating the economic value his work product adds to the total production of the employee's company. However, this theory is inadequate because it cannot readily account for the "value" added to the corporate bottom line of certain classes of workers. For example, a cleaning woman at a factory does not, in any appreciable way, contribute to its actual production; nonetheless, she must be paid. But the value-added theory won't be of much help. This theory later became an embarrassment as it was co-opted by Marxists and socialists as justification for denying capitalists of any return on their investments, in the interest of giving workers the full due for their labor.
Another theory that tends to be popular among the "Austrian" economists (such as Ludwig von Mises or Milton Friedman) might be called a strict "market" approach to determining wages. In this theory, the employer determines wages simply on the basis of local market forces in the labor pool. Under this theory, if welders are in short supply and you need to hire a welder, you'll have to pay him more than you might if you were in another locale where they were more abundant. A corollary of this approach is an evaluation of what the market will bear. Therefore, if welders in your locale are, on average, paid $20 per hour, you will have to pay about that much. If you offer less, you may not be able to find a welder, or may be forced to hire welders of inferior competence. If you require above-average welders, you may offer somewhat more than the going rate in order to have your pick of the labor pool. The problem with this theory is that, while it works empirically to describe the real world, it cannot tell you how welders' wages got to $20 an hour in the first place.
From a Catholic perspective, these theories are problematic for other reasons. Pius XI condemned the "value-added" theory of wages in Quadragesimo Anno, saying:
Entirely false is the principle, widely propagated today, that the worth of labor and therefore the return to be made for it, should equal the entire value added. Thus the right to the full product of his toil is claimed for the wage earner. How erroneous this is appears from what we have written above concerning capital and labor (68).
By this statement, Pius XI condemned the efforts of socialists to deny property owners any return on their investment in the capital of their enterprises. But this condemnation also removed from libertarians an avenue by which they might reduce the value of workers to subsist solely in what they could produce.
In Centesimus Annus, John Paul II applauded efforts to guard against the danger of seeing labor as a mere commodity, and so continued the critique of a purely market-oriented theory of wages begun by Leo XIII. The advocates of the market theory of wages also held that, since labor was a commodity whose price is arrived at in the give-and-take of negotiation, any wage contract mutually agreed upon by employer and employee was legitimate. Under this theory, Leo XIII explained, injustice was only possible if the employer actually refused to pay all or part of the agreed-upon wage, or if the worker refused to work.
But the Church recognizes that often employer and employee are not equal negotiating partners. The Church has consistently recognized and supported the right of workers to organize so as to negotiate on equal footing with employers (RN 36–38). Historically, employers have frequently had an advantage over workers and could force employees to accept unfavorable terms. Leo XIII accused employers who acted in such a manner of inflicting "force and injustice" upon workers. However, the Church has also observed the extremes to which unions have sometimes gone, at times paralyzing industries and even whole countries, all but dictating terms. Pope Paul VI, in Octagesima Adveniens, chided unions for giving in to the "temptation… of profiting from a position of force to impose, particularly by strikes… conditions which are too burdensome for the overall economy" (14). As in all other things, the determination of wages must be done with a view to the common good. Pope John XXIII taught in Mater et Magistra that the criteria for a just wage must take into account not only the good of the worker but also "the financial state of the company for which he works," thus including the good of the employer as well (71).
The Family Wage
Since Rerum Novarum, the Church has fervently held that the basis of determining a just wage should be the concept of the "family wage." The family wage is one sufficient for a working man to support himself, his wife, and his children. While the Church acknowledges that all members of the family have a contribution to make to the well-being of the family, she nonetheless insists that the norm of stable family life is founded upon there being one principal breadwinner for the family, the father; as Pius XI wrote: "Every effort must therefore be made that fathers of families receive a wage large enough to meet ordinary family needs adequately" (QA 71). John Paul II also advocated the family wage, seeing it as a protection against treating human beings themselves as a commodity, to be evaluated solely on the basis of their productive potential.
Perhaps the single greatest difference between the outlook of most modern economic thought, whether conservative or progressive, and the Church in matters of social justice is in the understanding of what constitutes the basic economic unit of society. Modern economic thinking tends to see the individual as the basic economic unit: Wages are accounted to people as individuals, on the basis of their productivity, without regard to "external" factors such as their families. Indeed, such an approach has been enshrined in many states' employment laws. If an employer, having two employees doing the same job, were to pay one employee more than another on the basis that the first had a large family and the second was single, that employer might find himself in trouble with the authorities. But the Church recognizes that human beings are essentially social in their nature: Humanity is not a collection of individuals in autonomous isolation from one another, but a society, which has the family as its fundamental building block (CCC 1879 – 1882). Thus, John Paul II wrote, any concept of wages that does not take the family into account is "purely pragmatic and inspired by a thoroughgoing individualism" and "is severely censured" by the Church (CA 8).
Is a Minimum Wage the Solution?
The effect of Catholic social teaching, the growing awareness of a need to protect workers against exploitation, and the rise of the social gospel movement among Protestants in the 1920s all contributed to the adoption of minimum wage laws. While many welcomed these laws as part of the effort to protect and lift up the condition of workers, there were nonetheless many Catholic scholars and bishops who were skeptical of or even opposed to such measures. The first minimum wage law in the United States was enacted in 1938, as part of President Franklin D. Roosevelt's New Deal programs. Since then, the minimum wage has risen from the initial $0.25 per hour to $5.15 per hour.
Does the minimum wage in the United States fulfill the Church's prescription for a "family wage," that is, a wage sufficient for a father to support a family decently by himself? If we take the U.S. statistics regarding the "poverty line" for a family of four as our baseline for what might be considered a family wage, the answer is no: It does not accomplish that now, nor has it ever. According to wage and poverty statistics, the minimum wage has never risen to, much less above, the poverty line. In real dollars (adjusted for inflation and purchasing power), the highest the minimum wage has ever been was in 1968, when it was 90 percent of the poverty-line wage. Currently the minimum wage is approximately 57 percent of the poverty-line wage.
Should the minimum wage be sufficient to raise a family above the poverty line? The question may be better rephrased in this way: Are minimum wage laws the most appropriate way of fulfilling the Church's call for a just family wage? This question takes us from the articulation of principles to issues of application of those principles. In short, it leads us to the area of prudential judgments, and the Church generally refrains from advocating specific solutions to problems that lie in this arena.
The Church herself recognizes that the power of the state and its laws is not always the best mechanism for bringing about desirable ends. Aquinas wrote in the Summa Theologica, "Human law cannot prohibit everything that is contrary to virtue" (II-II, q. 77, a. 1). By extension, then, it follows that the state cannot, by law, mandate all things virtuous. And so the Church, in advocating the establishment of just wages, acknowledges that "primary responsibility in this area belongs not to the State but to individuals and to the various groups and associations which make up society" (CA 48).
This recognition of the limited ability of laws to bring about desirable ends is echoed by economists, who have been critical of the effects of minimum and family wage laws. One criticism is that they treat all workers as though they were heads of families, which is clearly not the case. As legitimate as the demand is for a family wage for the heads of households, a 19-year-old single man just starting his career in the work force does not have a moral claim to such. A second criticism of the minimum wage, say economists, is that it treats workers as though they were in a static condition regarding their wages. Minimum wage laws, and the family wage concept, they say, assume that workers join the work force at a certain level of skill and wages and remain there, necessitating a relatively high family wage from the outset. But, they point out, in a modern economy workers frequently change jobs and regularly advance in their careers, and as they acquire skills and experience they naturally command higher wages. Minimum wage laws and the family wage concept, they say, ignore this reality.
These criticisms bear not on the validity of the family wage theory itself, but on its application. Recognizing that workers in industrialized societies, when they start their careers, usually are not married with families, it is legitimate to modify the criterion for the just wage to account for this reality. Furthermore, since these same workers, possessing relatively few skills at the beginnings of their careers, will almost as a matter of course increase their wages as they gain skills, it would also seem appropriate to adjust the standard for a just wage in recognition of this reality. Thus, it seems reasonable to make some provision for "entry-level" wages in setting the standard for a just wage, and therefore a minimum wage. One can conclude on this basis that it is not necessary for the minimum wage set by the state to be equivalent to the family wage.
Another criticism of minimum wage laws falls under the evaluation of their unintended consequences. Economists point out that the economy is like an organism in a state of equilibrium. If you alter the conditions in one part of the organism, it will have effects in other parts. Because of the complexity of the organism, the nature and severity of those effects are frequently unpredictable. Minimum wage laws, they charge, distort the market forces that govern wages and have the unintended consequence of increasing unemployment. The problem, as Henry Hazlitt described in Economics in One Lesson, is this:
The first thing that happens… when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment.
The problem is that there are some people whose skills and abilities are such that they cannot produce enough to be "worth" the minimum wage. While one might rail against quantifying a worker in this way, the fact is that an employer has no incentive to hire such a person. He may decide to do so out of a spirit of generosity, but generosity cannot be compelled, and a businessman cannot afford to be unlimited in his generosity. Thus the prescriptions of morality and the good intentions of lawmakers run up against economic reality.
This is a serious problem, as the Church also teaches that the worker has an obligation to work to support himself and his family (RN 10). Where a duty exists, anything that detracts from the capacity to carry out that duty should be eliminated. John Paul II further developed this teaching in Laborem Exercens, saying that by work man fulfills God's charge to exercise dominion over the earth, and therefore work is an expression of human dignity. Because of the important place of work in the expression of human identity, John Paul II asserts that people have a right to participate in the economic life of their communities (LE 18 – 19).
Handle with Caution
There is a tension, then, between the necessity of providing just wages and the need to allow the fullest access to employment possible. Minimum wage laws can be seen as promoting the first objective but hindering the second. The prudent legislator must try to find a course that will not create evils worse than those he seeks to eliminate, and most would agree that being unemployed with no income is worse than being employed for a sub-optimal income. However, the effect of a minimum wage is largely dependent on where it is set. Fortunately, in the United States, the minimum wage is low enough, in comparison to prevailing wages in most localities (which are largely the result of market forces), that in all likelihood it is not now a significant source of unemployment. For example, in my own community, entry-level jobs in the fast-food industry, which are generally considered low-skill, pay between $8 and $9 per hour, more than 50 percent higher than the minimum wage. Where the prevailing wage is so much higher than the legal minimum, the minimum wage will serve mainly to prevent gross exploitation of workers.
But because of the potential for creating unemployment, extreme care must be exercised in evaluating the occasional calls for increasing the minimum wage. The current state of near – full employment in the United States and the relatively wide gap between the minimum and the prevailing wage may not be a coincidence. For this reason, it can be highly imprudent to advocate raising the minimum wage, as the USCCB did in its 1986 pastoral letter Economic Justice for All, and as it has in the recent "Action Memo" cited previously. A balance must be struck between the good of promoting access to employment and that of promoting a just wage, and the reality must be acknowledged that the goal of the family wage will not be achieved by legislation.
The focus of Church teaching has been to proclaim the rights of workers to just wages, and to vigorously assert, in the face of reductionist trends, that workers cannot be treated simply according to their value as economic producers. These trends in Catholic social thought have coalesced into the concept of the family wage, which is the basis of evaluating the justness of wages in society. But representations of Church teaching that suggest it necessarily mandates an increase of the minimum wage – at this or any other time – are at best oversimplifications and at worst misrepresentations of a complex moral question, in which prudential considerations weigh as heavily as theological principles.
The goal of Catholic social teaching is a just, family wage for every head of household. But the Church recognizes that the family wage will not be achieved by the blunt instrument of legislation, applied without reference to economic realities. Rather, as John Paul II taught, it will be attained by making sure that education and training are made available to the widest number of persons so that they can command the wages that will enable them to live becomingly, as Aquinas said, in dignity and comfort.
Rev. Robert Johansen is a priest of the diocese of Kalamazoo, Michigan, and blogs at thrownback.blogspot.com.
