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Duties of the Consumer

Discussions on just wages usually begin with statements like, “How can anyone live on $5.15 an hour and still raise a family? The minimum wage needs to be changed.” Or “How can we justify selling shirts in our stores for twenty-five or thirty dollars apiece when they were sewn in Latin American for fifty cents or less?”

From there the conversation often proceeds to blaming global businesses and capitalism for exploiting workers. Others blame misguided government initiatives. Everyone seems to be searching for a suitable scapegoat—usually in the form of big businesses or ineffective government policies. The discussions often end here as most throw up their hands on what to do about the problem.

Unfortunately, the discussion cannot just end, for as Pope John Paul II states, “a just wage is the concrete means of verifying the justice of the whole socioeconomic system.” Such words compel us to work continually towards just wages. But is this plea solely for business leaders, workers, and government institutions?

What of another player who is seldom mentioned in the just wages debate? Instead of unilaterally blaming large organizations, should we focus more on the actions of consumers? Could our own day-to-day individual buying decisions be partially to blame, or does this scapegoat hit too close to home for most to accept?

On a recent flight I was talking with my seatmate about shopping in the Internet age. We discussed the great prices you can get by watching weekly sales and shopping on-line. We traded stories on how prices in some industries, such as electronics and computers, actually decrease over time. We even joked in wondering how companies actually make any money with constant sales promotions and Internet competition. But as we exited the plane, I had a nagging feeling that such laughter might be a covering for our personal responsibilities in just wages.

As I realized later, this hint from my conscience was a reminder that something more was at work here. As consumers, our buying decisions influence the world around us, including the justice of our economic system. Therefore, it is our duty to understand how our decisions influence the business world, and then use this knowledge to help drive our future actions. Even if we remain outside the pull of the consumerist culture, we still have the responsibility to understand the consequences of our decisions.

Unfortunately, few of us consider our personal roles in the standard rallying cry for just wages. Maybe we hope to limit our culpability by not really knowing, although using the defense of invincible ignorance remains a poor option for the committed Christian.

So what’s the real issue here? As consumers we typically choose invincible ignorance since we seldom consider what it takes for stores to offer low prices and still make a profit. We don’t understand the consequences of stores constantly rolling-back their prices with bouncing yellow ‘smiley-faces.’

That ‘smiley-face’ we see in commercials could be the consumer, you and me. We love to pay less when we shop and often hunt for bargains. By comparing prices we get the best value for our hard-earned cash.

Even though we want prices to be low, we also want high wages. With more money in our pockets and low prices in stores our dollars stretch farther and we can increase our standard of living. But could our desires for high wages and low prices be somewhat in conflict? Let’s consider from common sense principles—Business 101.

Take Wal-Mart as an example. I’m only singling them out because they’re the best known at providing consumer goods at low prices. Customers love their ‘everyday low prices’ and have propelled Wal-Mart to become one of the largest corporations in the world. So how do they get such low prices? For one, they buy in bulk. More importantly, though, they focus on managing and controlling costs along the entire supply and distribution chain—a unique ability for which they are well-known in the business world. I recall a story from a small supplier: “I went in for a sales call as a tiny grape with small profits, and I came out a shriveled raisin.” The supplier may lament, but the consumer cheers; for Wal-Mart passes the savings directly to the consumer through lower prices.

So how does this affect just wages? Consider the supply chain and take the example from the earlier statement where a third world worker is paid fifty cents for a shirt that retails for twenty-five dollars. The worker’s wages don’t seem fair at first glance, or do they? Yes, the worker sewed the shirt. But when considering the total supply chain of providing a shirt for a customer, we could ask, who planted and harvested the cotton used to make the shirt? Or transported the cotton to the mill and had it woven and colored? Or designed the shirt’s pattern and purchased the sewing machines? Or wrapped and packaged the shirt? Or loaded packages on a boat or truck for shipment? Or built the distribution centers and retail stores where the shirt is eventually sold? Or performed the accounting functions to track the financial numbers?

Did that single worker who sewed the shirt perform all these functions? No—the worker only contributed in one small part of the entire chain of events which supplied this shirt to the store. Maybe the fifty cents paid for sewing the shirt measures the true value of its contribution to the supply chain.

Some might be tempted to ask, “Why not just pay the worker more and I’m sure customers would be willing to pay a dollar or two extra for that shirt?” A noble thought, certainly. But if you pay that person more, what about all the other workers in the supply chain that contributed to the shirt? Shouldn’t we also pay them more if we’re truly concerned about increasing wages?

The situation quickly gets more complicated, and expensive. If you raise everyone’s wages, the question isn’t whether the consumer’s willing to pay an extra dollar or two more, but rather, would the consumer be willing to pay fifteen or twenty dollars more for that same shirt?

If you or I were in a store and saw two shirts of identical color, style, and quality sitting side by side, one priced at twenty-five dollars and the other at forty dollars, which would we buy? Most would probably choose the lower priced shirt.

Businesses know this. Through market research and sales analysis companies know pretty well what their customers are willing to pay. Therefore they design supply chains to produce their products at a price customers are willing to pay, but which still allows a profit. When businesses are forced to decrease costs in the marketplace, productivity enhancements can only go so far before wages must be affected. Either wages can be decreased or else portions of the supply chain get outsourced to lower wage countries.

Okay, this makes sense. But still companies make a lot of money, don’t they? Why don’t they just use their profits and pay workers a little bit more? Shouldn’t companies follow the example of the vineyard owner in Matthew 20:1-20 and be more generous to their workers? Or as the late Stefan Cardinal Wyszynski commented,

Did the householder need these men? Obviously not: otherwise he would have employed them from the morning onwards and not put himself to the expense of paying a full day’s wage for barely an hour’s work. No, the householder is concerned about something quite different: that no one should live without work.

Many other religious figures often site this passage in discussions with business leaders on how they should treat their workers. However, with all due respect to the Cardinal and others using this parable, I’m not sure how well it really applies to the business world. Did you ever wonder what happened when the owner in Matthew’s parable went to find workers the second day? Do you think he found anyone willing to work in the morning when they knew they’d get the same pay for starting in the afternoon? Doubtful. In the business world companies and their managers must deal with basic human nature when hiring and paying workers and prudently use their profits.

Most people are surprised to learn that a large majority of businesses have profits of less than 7 percent. For example, we live in our business with after tax profits of 3—4 percent. Not great, but livable. All businesses are not profit ‘rich,’ and many are profit ‘poor;’ and this profit must be used judiciously for investment to survive long-term in the marketplace. Consider what Peter Drucker, one of the better management and business thinkers, states about profits, “the problem of any business is not the maximization of profit but the achievement of sufficient profit to cover the risks of economic activity and thus to avoid loss.”

Few businesses exist solely to maximize profit. Most realize this is a fool’s chase. Wall Street likes healthy profit margins (assuming correct accounting practices, of course). However, companies with high profitability tend to quickly attract competition. Soon prices begin falling and unless they change their products or lower profit margins, they may find themselves priced out of the market. Think what happens with the latest fads in toys, dolls, or electronic devices. Almost overnight it seems competitors enter the market with similar products, usually at lower prices, and soon begin taking away sales and profits.

This ‘law of business competition’ dictates why companies continually manage profitability through both pricing and striving for cost efficiencies. If you fail to manage your costs and prices effectively, your competitors will force the issue. Companies such as Intel and Dell have made this management practice a science as they continually lower prices on last quarter’s electronics and computers. They could make higher profits in the short term, but it would dictate higher prices in the market place and soon their long-term viability could be threatened. In Business 101, there is no free lunch. Companies must continuously balance costs and profitability, pricing their products at levels where consumers are willing to buy, where they can make a profit and still remain viable against the competition.

Those same market forces on pricing and cost arise when discussing aspects of the minimum wage. For example, some cities have begun enacting living wage legislation requiring all contractors working for the city to pay their workers a minimum of ten to twelve dollars per hour. Again, this sounds great at first glance. But as a taxpayer, i.e., the consumer, how much more are you willing to pay in new taxes each year to cover these wage increases, $100, $1,000, $5,000? The money must come from somewhere. Just like in a business, the costs of production get passed to the consumer, or the taxpayer in this case.

These factors apply to just about everything we buy on a day-to-day basis. How much more would you be willing to pay for a Big Mac to support minimum wage increases? What about clothes or staples such as a gallon of milk and a loaf of bread? Would you be willing to pay 50 percent more, or even double the price, to support higher wages for workers? Just wages aren’t just a concern for businesses and governments, they’re directly influenced by decisions and desires of the consumer.

So what are we as consumers to do about it? We’ve seen how consumers play a role in just wages. Therefore we do have some culpability and can no longer hide behind invincible ignorance. Our consciences have been informed and as consumers we can make choices—maybe choices that influence the overall justice of our economic system. Again, to quote Pope John Paul II, “A given culture reveals its overall understanding of life through the choices it makes in production and consumption.”

If consumers showed the willingness to pay more for ‘just wage’ goods and services, businesses would begin filling this market niche over time. Recall what happened with organic foods over the past decade. It took years before consumers decided they would pay more to cover the higher supply chain costs of growing organic fruits and vegetables and getting them to market. Today, wide varieties of organic foods are generally available and supported by the consumer, albeit at higher prices. Could something similar happen with ‘just wage’ clothes or food? A few companies have actually begun taking such an approach, though with mixed results to date. Consumers don’t yet appear ready to embrace this concept.

Is it morally acceptable to still shop for the lowest price? Yes, for wages paid to workers constitute only one element in the total pricing decision. Also, wages paid along the supply chain might actually be socially just in many Third World countries. In addition, it’s often difficult, if not impossible in today’s environment, for consumers to determine how workers are paid for producing various products and services.

Is it morally acceptable to stick our head in the sand and not worry about how our buying decisions affect wages? No, for social justice principles dictate that we must work towards greater justice in our economic systems. Our future buying habits will influence what types of products and services companies eventually bring to the marketplace.

So the next time you’re in a discussion about just wages, agree that yes, businesses and governments share some of the responsibility and the blame for paying workers fairly. But don’t let the debate end there, for the scapegoat most responsible for just wages may be the person in the mirror—the consumer.

We can talk about the great deals we’ve gotten and wonder how companies stay in business. But our pocketbooks dictate our values. We appear to value low prices and the ability to buy stuff more than we value just wages. The question is whether we are willing to change our actions, even if it hurts our bank accounts?

Before passing judgment on corporations and governments, we should consider Jesus’ warning in Matthew 7:1—5 and look inward to our actions as consumers. We just might find a large wooden beam there in our own eyes, obscuring our vision.