Just Wages

The National Conference of Catholic Bishops recently issued a statement, Faithful Citizenship , calling for “policies that increase the minimum wage so that it becomes a living wage.” In doing so, they cite the one principle of Catholic social doctrine most likely to arouse old class hostilities. The sharpest argument ever offered to justify the minimum wage was provided by Karl Marx in Das Kapital . Using the power conveyed by his ownership of the means of production, Marx said, the capitalist compels the worker to produce an amount that exceeds what he is paid in wages. The “surplus value” thus generated is the source of the capitalist’s profit. This being the case, legislation that shifts the balance of power from capitalist to worker is one way to expropriate the expropriators. Workers of the world, unite”and vote for the party that promises to increase the minimum wage.

Of course, no one”least of all the NCCB”would nowadays take seriously Marx’s flat“footed, mechanistic diagnosis of capitalist injustice. But the myth he created”profit is a species of “surplus” that can be painlessly redistributed from investor to worker”lingers on in the communal subconscious to provide justification for increasing the minimum wage. The Bishops’ statement, if it has any effect, will only help revive this myth and the class animosities it engenders.

According to the original exposition of the “living wage” principle by Pope Leo XIII in Rerum Novarum (1891), the worker had been reduced to proletarian status by the onset of the Industrial Revolution. Where previously he had tilled land from which he could eke out at least a modest living, now he had been forced into a situation where he could acquire the means of subsistence “in no other way than by his work and wages.” In this situation, his distributive right as a member of the community was reduced to a contractual claim against his employer. But, Leo insisted, each worker, as head of a household, had a right to a wage “sufficient to maintain himself, his wife, and children in reasonable comfort.”

Pope Leo analyzed the social conditions of nascent industrialization and discerned this previously unrecognized moral principle. His American commentators made the policy inference that the natural right to a living wage provides justification for minimum wage legislation. In 1906, Father John A. Ryan, the “labor priest” who became the New Deal’s favorite Catholic theologian, took Pope Leo’s principle to mean that “as protector of natural rights the state ought to compel employers to pay a living wage.” But plausible as it may have seemed, Fr. Ryan’s notion that the right to a living wage called for enactment of a legal minimum was not in fact espoused by Leo XIII, and, what is more important, was clearly bypassed in the subsequent development of the social magisterium.

In Quadragesimo Anno (1931), Pius XI developed the living wage principle with a rectification of the Church’s traditional teaching on natural law and justice, a rectification intended to transcend the kind of hostility to modernity exemplified in Pius IX’s Syllabus of Errors (1864). “Custom,” wrote the medieval expositors, “makes law.” In this view, it is the accumulated experience of the community, distilled into social roles, that provides guidance for individual conduct, linking basic moral precepts with day“to“day practice. Codification, legislative enactment, and formal procedures are secondary and derivative. In a stable society, the provenance of custom can be taken for granted.

But modern societies, with their widespread social mobility, made rule by tradition and custom much more complicated. Pius XI recognized that while moral principles remained the same, the customs by which they were lived changed as often and as quickly as did society. He therefore identified a new virtue, “social justice,” that should guide the evolution of custom.

For Aristotle, the just man is required to fulfill contracts, distribute common goods fairly, and obey the law of the land. For Pius XI, the just man also has a first“order moral obligation to contribute to the development of equitable rules and practices in his sphere of society. Social justice is a sort of practical wisdom, which, unlike abstract scientific knowledge, is a grasp of truth acquired “by inclination,” particularly the inclination to good that operates in the soul of the virtuous individual. Such inclination produces a precious fund of wisdom, which sound social policy draws upon to understand and react to new social situations. The “principle of subsidiarity,” often cited as Pius XI’s original contribution to the social magisterium, should be seen in this context; the judgment about how to act should be made at the most concrete and practical level possible. Pius drew on such a conception of practical wisdom and the virtue of social justice to develop his predecessor’s teaching on the worker’s right to a living wage.

Pius adopts the premise of Leo’s analysis that with the onset of the industrial revolution the worker is left with “nothing but his labor by which to obtain the necessities of life.” This being the case, justice requires that “the wage paid the workingman must be sufficient for the support of himself and his family.” However, it is important to note that in developing his teaching on the living wage, Pius XI explicitly acknowledges a fact of life that liberal politicians and trade union apologists love to deny”“a scale of wages excessively high . . . causes unemployment.” A private“sector business firm, unlike a tax“supported government agency or an endowed university, meets its payroll with revenue derived from the sale of products. This being the case, the wage rate must be adapted to market realities.

Evidently, for Pius XI, the achievement of wage justice requires compliance with two different principles. The wage rate must, first, allow the firm to stay in business, and second, provide the worker with income sufficient to support himself and his family. In Michael Naughton’s terminology, the “living wage” must also be a “sustainable wage.” The unavoidable dilemma is evident: What is to be done when the “sustainable wage” that an employer can afford to pay falls short of the “living wage” the household head needs to support his family? At this point in his analysis, Pius XI could have adopted the proposal made by Ryan; he could have called for passage of a law specifying a legal minimum wage. Instead, he cites the virtue of social justice to explain how the tension between sustainable wage and living wage is to be resolved.

The achievement of wage justice involves a multi“stage process. The worker uses his skill and strength to produce wealth to add value to raw material. By such an act of “specification,” so the natural law indicates, he acquires a property right in the commodity produced. However, as an employee using productive resources owned by another, he regularly exchanges his property right in the commodity for a wage claim against his employer. On payday, he expects to receive not, for example, 4.8 yards of cloth, or 2.4 pairs of shoes, but rather a sum of money. Strict quid pro quo commutative justice requires that the amount of this wage equate with the value of the worker’s contribution to production. And microeconomic theory indicates that a wage so proportioned to productivity (to the “value of the worker’s marginal product”) would indeed be sustainable.

However, according to Pius XI’s exposition of the connection between the virtue of social justice and the natural law, the employer’s responsibility to the human community does not end when he pays the wage that matches value produced by the worker. For if that sustainable wage falls short of the living wage, the virtue of social justice imposes a further moral obligation on the employer. He must make his best efforts to help the worker increase the value of his work so that his productivity earns him a living wage. He is required, for example, to introduce training programs, apprenticeships, educational fringe benefits, i.e., those measures that enhance labor productivity.

And the responsibility does not stop with the employer. The lessons learned in the various workplaces provide the insights and incentive for the development of outside institutions that can support these improvements in workers’ conditions. The virtue of social justice requires that all those whose social role bears on the wage relationship”employer, union shop steward, school official”strive to achieve those institutional adjustments that will qualify the worker to earn the living wage.

Thus, Pius assumes, when the virtue of social justice has done its work, both on the shop floor and in the matrix of supporting institutions, the worker will find that the value added to product by his productive effort, the wage claim he acquires against his employer, will generate income sufficient to support his family and to provide the resources required for him to fulfill his social role as household head. He will receive a living wage, not as entitlement conferred by the welfare state, but rather as just reward for his productive effort. The living wage doctrine protects both the worker’s distributive rights and his personal dignity.

The living wage doctrine was formulated a century ago to identify a crucial moral guideline that could provide direction for a society undergoing the strains of industrialization. As a critique of policy and practice, as a rebuke to conscience, the living wage principle retains its relevance to this day, for instance in its bearing on the international sweatshop problem.

According to those who would seek justice through the minimum wage law, the solution to the sweatshop problem seems obvious. The United Nations Declaration on Human Rights should be expanded to include the right to a living wage. Membership in the World Trade Organization would be allowed only to nations that respect and enforce such a right. Adoption of an international minimum wage law would forestall the migration of jobs, deny multinationals the opportunity to play impoverished workers against one another, and head off the international “rush to the bottom” that union leaders warn us about.

However, if Pius XI’s analysis of the wage relationship is correct, introduction of an international minimum wage law could have dire unintended consequences. What passes for a reasonable minimum wage in an advanced economy would far exceed the “sustainable wage” that a Third World textile employer could pay and still stay in business. To mandate payment of the international minimum would deprive Third World workers of the jobs they now have.

The grim fact of life is that for unskilled Third World workers, as was the case for the immigrants who manned turn“of“the“century steel mills in the U.S., employment at a low“wage job provides entry into the circle of productivity and exchange, access to the technological patrimony of the modern world. Such access, as John Paul II affirms, is essential for the eventual economic liberation of the Third World poor. To close off such entry with a minimum wage law would benefit workers in the advanced industrialized nations, but such a measure would, in fact, violate the preferential option for the poor.

This conclusion does not imply that sweatshop employers are off the hook. According to the teaching on social justice, a firm that moves into the Third World to take advantage of lower wages takes on a grave moral obligation to do what it can to alleviate the background social conditions that produce a dysfunctional labor market. It may be impossible for a textile employer in a competitive market to both offer employment and pay a living wage. He may therefore be morally justified in hiring workers at the prevailing “sustainable” wage. But such an employer must also do his best to rescue the Third World poor from their misery.

By affirming the worker’s right to a living wage, Leo XIII made a precious contribution to the moral self“understanding of modern industrialized society. With his teaching on the virtue of social justice, Pius XI indicated that it is, in major part, private sector initiative working steadily for the progressive reform of the rules and procedures guiding common action that is to bring such a right to realization.

Politicians love to drop a reference to the living wage into debate about the minimum wage. “Does anyone believe,” says the familiar complaint, “that you can support a family on $5.15 an hour?” But, as a matter of fact, linking the right to a living wage with the political push for a higher legal minimum wage, as the NCCB has done, distorts Catholic teaching on wage justice and, as the discussion of the sweatshop problem indicates, could be a disastrous guide for public policy.

Stephen T. Worland is Professor of Economics Emeritus at the University of Notre Dame.