Acton Commentary

Giving the Just Wage Its Due


In a recent letter to Congress, 33 faith leaders in conjunction with Interfaith Worker Justice (IWJ) and Faith in Public Life (FPL) expressed their support for raising the federal minimum wage in the United States. Rather than making an argument on prudential grounds and weighing the costs as well as the benefits, they firmly believe the issue to be a clear-cut, moral matter: “Driven by Scripture’s repeated admonitions against exploiting and oppressing workers, we believe that every job must enable those who work to support a family.” They continue, “For the minimum wage to be moral and just, it must be a living family wage. A minimum wage that pays a full-time worker $290 a week is unjust in an economy as wealthy as ours.” Unfortunately, such a simplistic approach to the just wage fails to give adequate attention to the principle of justice itself.

The sentiment of the faith leaders’ letter is common.  A statement in February from the United States Conference of Catholic Bishops (USCCB) similarly stated: “The federal minimum wage needs to be raised, not just for the financial security of the worker but also for their dignity and health of their families.” Both the IWJ-FPL letter and the USCCB statement connect the minimum wage to the concept of a living wage and the living wage to the idea of a just wage. Thus, they argue, raising the minimum wage is necessary to ensuring a just wage. But are these concepts so inextricably connected?

Not only are they not necessarily connected; they cannot be connected in this way at all. The problem lies in focusing on the universal to the neglect of the particular: a collectivist error.

Justice, classically defined, is to render to each what is due. A just wage, then, is that wage which remunerates a worker with proper regard to his or her particular contribution, need, and other circumstances. The focus on a living wage reduces this criterion to need alone and furthermore presumes that the need of each worker is the same. But is this actually the case? No, it isn’t.

For one, cost of living varies greatly depending on locality. A living wage in Grand Rapids, Mich., for example, falls far short of a living wage in New York City.

Additionally, whether a person is the sole breadwinner, joint breadwinner, or a dependent on the income of others or other sources vastly changes what constitutes a living wage for any given worker. For a teenager dependent on the income of his or her parents, a student subsisting in part on loans and scholarships, or a retiree simply supplementing his or her savings and Social Security, a living wage might be zero, but this would hardly be just.

The USCCB, at least, seems aware of this variety, stating, “One-quarter of all workers who stand to benefit from a proposed federal minimum wage increase are parents, raising 14 million children.” They continue, “Forty percent of minimum wage workers are the sole breadwinner of their family.” Yet, given that only 25-40 percent actually need a living wage, what about the other 60-75 percent? Why not advocate for a policy that targets this smaller group alone, rather than obscuring this significant concrete reality?

And therein lies the problem: Federal minimum wages, and even state minimum wages, have a universal character -- minimum wages cannot pay respect to particulars like city of residence, household status, or other vital, personal details required by the demands of justice. While this does not make them unjust per se, it does mean that conflating the minimum wage, living wage, and just wage is illegitimate. Rather, their good (or ill) is therefore conditional upon their consequences and a matter of prudential judgment.

As for the consequences, contrary to the assertion of the IWJ-FPL letter that “[a]bundant economic research demonstrates that raising the minimum wage does not hurt small businesses or cause layoffs, but in fact stimulates the economy while lifting many out of poverty,” it is fair to say that economists are generally divided on the issue when it comes to small raises to the minimum. This is likely due to the availability of other channels of mitigating the increased cost, including reducing employee hours, non-wage benefits, and training, as well as raising prices, finding ways to increase efficiency, reducing wages of higher-earning employees, or forgoing profit (and, thus, investment), among others, as one pro-minimum wage study has noted, focusing on increases from 5 to 10 percent.

Few of these effects are themselves positive, and most economists agree that larger increases would in fact negatively affect employment for low-wage workers. The CBO has estimated a loss of half a million jobs for President Obama’s proposed increase from $7.25 per hour to $10.10, which the IWJ-FPL letter endorses. This would be a 39 percent increase. A “living wage” -- without any consideration of the vital concerns above -- is often estimated as somewhere between $12 and $15 per hour, a 65 to 107 percent increase, respectively. No doubt the loss of jobs resulting from such a significant change would be much higher than half a million.

The economist Wilhelm Röpke studied the effects of tying the minimum wage to an estimated living wage. In A Humane Economy, he warns of “a wage-price spiral in which rising wages and prices keep pushing each other up, especially and most effectively in the presence of the fatal system of a sliding scale of wages determined by the cost-of-living index.” Thus, the gains of such an increase to those who keep their jobs, according to Röpke, would quickly be rendered ineffective due to rising costs of living. This is further complicated by rising inflation: “the wage-price spiral presupposes continual injections of new money” into the economy, he writes. And this, of course, eventually would be bad for everybody.

Thus the costs of such a large increase to the minimum wage would outweigh the benefits, ultimately making it imprudent. Yet to focus exclusively on this debate, however important, would be to completely lose sight of the problem of the just wage.

Ben Casselmen, in a recent article at Five Thirty-Eight, gives an excellent delineation of the demographics of low- and minimum-wage workers, noting, “A larger share of low-wage workers are trying to support themselves today than in past years. About 39 percent of workers earning under $10.10 an hour -- adjusted for inflation -- were supporting themselves in 1990, compared to more than half today.” A better question than how we can get these people a raise is to ask how they got in this situation in the first place and whether raising the minimum wage would actually reverse this trend. Considering the forgoing, I am not convinced that it would.

Perhaps a smaller increase could stop some of the bleeding, but it would not address the much larger and more important cause or causes. IWJ, FPL, and the USCCB genuinely desire to see more just wages in our economy and living wages for those who support themselves and their families (as all Christians should). However, finding answers to why so many more people today find themselves with less-than-adequate wages in the first place ought to take priority over advocating for the latest progressive economic policy. Worse still, despite their good intentions, by paying no mind to the negative consequences of these policies, disregarding the particulars of each person’s situation, and conflating the minimum wage, living wage, and just wage, they ultimately fail to give justice its due.