A Living Wage

I am not an economist, but I know my way around a supply curve; I can explain the difference between the Federal Reserve's reserve requirement and the discount rate without missing a beat. Nevertheless, I have a hard time making up my mind on the split that has developed in conservative circles on economic issues. Some days I find myself nodding in agreement with those who favor a greater role for the government in managing our economy, Pat Buchanan and Charley Reese, for example; on others I'm in the camp of free-market theorists such as Walter Williams and George Gilder. I hate to admit this, but I tend to agree with whomever I have read last. What can I say? What was the line in the old beer commercial — the one about "feeling strongly both ways"? That's me.

I'll give you an example of what I mean. A while back, at the very time I was doing some reading on the Church's teaching on the need for legislation to guarantee workers a "living wage," I came across a column by Walter Williams on minimum wage laws. He is against them. I was flopping back and forth like a just-hooked trout.

Williams has spent his career arguing that state intervention in the economy — such as that advocated in the social encyclicals in the name of social justice — does more harm than good. He makes his case persuasively. The column in question on the minimum wage was no exception: "The idea that minimum wage legislation is an anti-poverty tool is simply sheer nonsense. Were it an anti-poverty weapon, we might save loads of foreign aid expenditures simply by advising legislators in the world's poorest countries, such as Haiti, Bangladesh and Ethiopia, to legislate higher minimum wages."

 Williams insists that minimum wage laws actually make things worse for the poor:  "If I must pay $6.25 or $7.25 an hour to whomever I hire, does it make sense for me to hire a worker whose skills enable him to produce only $4.00 worth of value per hour? Most employers would view doing so as a losing economic proposition. Thus, one effect of minimum wages is that of discriminating against the employment of low-skilled workers."

I can remember reading this argument in the pages of National Review when I was in my late teens in the 1960s. Henry Hazlitt and William Rickenbacker were especially eloquent in making the case: Raising the minimum wage causes an increase in unemployment.  I became a true-believer. For a while.

What instilled doubts in me? Over the years, I watched the Congress and the state governments where I was living raise the minimum wage. It went up, and up. But unemployment rates didn't. Not every year. Some years the unemployment rate was considered high. Some years it was considered low. It has been considered very low by historical standards over the past 10 years. Where I was living, the minimum wage went up at least four times during that period.

Moreover, the unemployment rate has stayed low over the last 10 years even though illegal immigrants have been as busy as bees, working in restaurants, with lawn services and home repair companies. How many undocumented workers are there? 2 million? 10 million? Take your choice. The point is that our unemployment rate includes people who could be working at the jobs these illegal aliens are performing, but who choose not to.

You can argue that there are good reasons why unemployed Americans do not take these jobs. That is irrelevant to the discussion at hand. The point just now is only that repeatedly raising the minimum wage does not always lead to a lack of jobs. If there is an increase in the demand for labor, as there always is in times of economic growth, increases in the minimum wage will not lead to an increase in unemployment rates. Which means that enacting legislation to ensure a "living wage" for workers, as the social encyclicals recommend, may not have the undesirable consequences the free-market theorists predict.

So does that mean the social encyclicals have it right; that laws should be enacted to raise workers' salaries to enable them to live lives of dignity? In Rerum Novarum it is stated flatly that "wages ought not to be insufficient to support a frugal and well-behaved wage-earner." Rather, they must be enough "to enable [the worker] comfortably to support himself, his wife and his children." Sounds reasonable. What possible objection could there be to laws requiring that workers be paid in such a manner? Let me give you an example. Good intentions are not always enough.

About twenty years ago, I had a pastor, now deceased, who was fond of quoting from the writing of Msgr. John A. Ryan on workers' rights. Ryan was perhaps the best-known American Catholic writer on economic issues in the early 20th century. Ryan held that it was morally obligatory for employers to pay wages that would allow workers and their families to "live in reasonable comfort": that was Ryan's definition of a living wage. My pastor was convinced that Ryan's insight could be used to settle a teachers' strike in a nearby school district. The issue came up one night when a small group of men from the parish were sitting around the rectory after finishing work on the parish newspaper. There was a beer or two on the table.

"It's too bad people don't pay attention to the Church's social teachings at a time like this," my pastor observed. "I don't know why the teachers and the school board can't get together and come up with a salary package that meets Ryan's interpretation of the living wage. That shouldn't be hard to do in this day and age. What does it take for a family to live in reasonable comfort around here? There are people who can come up with those numbers. Get the numbers on the table and get everyone to agree to them, and your strike is settled." He slapped his palm on the table, as if to say, "Case closed!"

I liked my old pastor and was on good terms with him. I wasn't trying to upstage or embarrass him, but I couldn't resist the temptation.  This was a perfect occasion to explore a dimension to the Church's understanding of a living wage that always puzzled me.  

"But, Monsignor," I asked, "what would happen if a meeting like the one you want was to take place? What would it mean if the teachers' union leaders and the school board members agreed to accept a salary that would provide teachers with a living wage based on Monsignor Ryan's standard of ‘reasonable comfort'? Would that mean that local teachers would have to be paid enough to buy a house around here?"  My old parish was about 50 miles north of Manhattan, not a depressed part of the world.

"Yes," he answered.

"Even on one salary," I asked, "if, say, the teacher's wife is a stay-at-home mom?"

"Yes," he answered.

"Should the teacher, if he is a Catholic, be able to afford the tuition for 3 or 4 children at the local Catholic schools?"

"Yes."

"Should he be able to pay the tuition for his children to go to Fordham or Notre Dame when they are college age?"

"Yes," the monsignor replied, "with the children helping out with part-time jobs."

"Should the teacher and his wife and children to able to dress comparably to, say, the family of a mid-level executive at IBM?"

"Yes. Respectable, but not ostentatious."

"Should they be able to afford a new car or two every five years or so?"

"Yes."

"What about a vacation every year for the family, say a week at Lake George or out on the Hamptons?"

"Yes."

"Should they be able to save enough out of his salary to save for a comfortable retirement, lived in dignity?"

My questions continued for a while. But I won't go on. You get my drift. To support a family in the suburbs of New York City in the manner I was describing would have taken a salary far above that which any union leader would have dared to demand. My pastor's understanding of the Church's "living wage" — when applied to a concrete economic reality — was unrealistic.

So, does that mean Walter Williams is right? That the economy is too complex for government intervention in the economy in the name of social justice — even government intervention motivated by the principles of the social encyclicals?  That the social encyclicals offer sound general principles, but few tools to apply to the nuts and bolts of the economy?

Yes.

No, wait a minute: No.

I feel strongly both ways.

Flip-flop.

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  • Guest

    I'm mostly on Walter William's side, mostly.

     

    I was on the board of a charitable organization that had thrift stores to sell items donated to us, so the money could be used to help the poor. (Or occasionally we would give things from the store to the poor directly.) We wanted to pay our store workers a "living wage". The end result was that we nearly went bankrupt and had to close all our stores. The workers just weren't producing enough income to pay this "living wage". So these jobs went away.

     

    I think our big mistake was in thinking that a person would expect to support a family on the money he could make working as a clerk in a thrift store. What happened to the days when people would put off having children, or even getting married until they had advanced enough in their careers to be able to support them?

     

    The days are coming when many of these minimum wage jobs will gradually disappear. Raising the minimum wage will make this happen faster. I like using a parking garage that has a vending machine instead of a person collecting the money. I have been to a fast food restaurant where you order on a computer screen — they had people only to cook and deliver the food.

     

    Perhaps the explanation for why the unemployment rate doesn't go up significantly is that all that really happens is that the value of the money goes down. An hour of work used to be worth $5, now it's worth $7. What do you know? Every cost has gone up by 7/5! Since the government is one of the biggest debtors around, they don't mind a little inflation eroding the value of the government debt. Too bad for you industrious chumps, working and saving for tomorrow.

     

  • Guest

    'c-kingsley' has a point.

    Another thing is that a minimum wage devalues the worth of labor.  Someone who – with no experience and virtually no marketable skills – starts a job that pays minimum wage gets an unrealistic idea of his worth.  It takes out of the hands of the employer, who has both the right and the duty to encourage his employees to succeed and advance, the reward of the mentor role that he must adopt.  It replaces such a role with a gun-to-the-head "Do it or lose it" type of tyranny.  The employer becomes simply a conduit of the state's largesse, rather than a moral person who is charged by Our Lord to make the right choices.

  • Guest

    I wonder if the living wage , that is  (being able to live reasonably well in the society that you are in) should be proportionate to the income of the whole subgroup of the world you are in. Speaking to the suggestion of requiring a minimum wage in 3rd world countries, that wage would be proportionate to that society  (what I am saying that the extreme disproportionality of incomes is a problem).  If a person is waiting tables in a really posh restaurant, they expect to make more money than if they are working in the diner across the street from the factory.  In a country such as the US, where wo much of our economy is federally regulated or effected by national trends, in other words a national economy, it seems reasonable to have a nationally mandated response to people’s needs for a more equitable share of that total economy.     Also, is it true that during the great depression, where whole areas and subgroups were very poor, there was a social bond and an idea that we are “all in this together” which probably really encouraged effort? When things seem to be stacked against effort, when a person is working literally as hard as he/she can,  and still being poor, can’t that lead to a decrease in motivation?  If the American dream is going to fuel the economy, it must be at least a dreamable dream.

  • Guest

    The earners of mimium wage are first time workers and not people with

    families. Less than 3% of workers on mimium wage have families. While

    over 30% of mimium wage workers come from families with family income

    in excess of 30,000 dollars. It is for people who need to get to work on time,work for 8 hours and stay sober,then they can advance to higher

    work, not spend their live on mimium wage

  • Guest

    The problem with this article is that it is logically false. It falls victim to an error of logic called a "false dichotomy." A false dichotomy is when two alternative points of view are held to be the only options, when in reality there exist one or more other options which have not been considered. In this case, the false dichotomy is that there are only two economic systems, one a free-market based system and the other a government managed system.

    In fact, there are many economic systems besides these two. The author doesn't present one in particular: distributionism. G.K. Chesterton wrote extensively about it and promoted it whenever he could. It fits with all the Church's social teachings. It could create a more just society, if it was tried.

  • Guest

    47.3% of all statistics are made up on the spot. – Steven Wright.

    Charles E Blythe, would you please provide some references for your figures? Thank you.

  • Guest

    In California, per state stats, the average household income of families with one or more minimum wage workers is…….$49,000.  The authors of 19th Century economic encyclicals had never heard of 16 yrs olds working at McDonalds to pay for insurance on a car THEY own.  If you arent making enough to suit you, get some training, get a different job, move elsewhere etc.  The last time I looked, my local McDonalds was not owned by some character from Dickens with orphans chained to the burger grill. As a matter of fact  all the local Mcdonalds around here are owned by a guy with a 12th grade education whose career started flipping burgers for minimum wage.  That's right he bought in.

     

    One other thing…..what was this article about?  I felt like a quarter pounder getting the triple flip…was it about minimum wage?  was it about living wage ?  Maybe the author has trouble getting a grip on the issue because he forgets what he is talking about. 

     

  • Guest

    A couple of reasons why the unemployment rate would be relatively unaffected by a rise in the minimum wage (and thus does not serve as proof that these economic arguments against significantly raising the minimum wage are incorrect):

    * As Mr. Blythe indicates, the minimum wage most affects first-time workers (teenagers, for example, or potential part-timers) who are typically not included in unemployment stats. A higher minimum wage means these potential work-force entrants simply don't have as many jobs to choose from and don't get that first job–at least not yet.

    * The new minimum is pegged at a rate that is still below the true going rate for many beginning workers (i.e., most employers are paying these workers at or above the new minimum already.) If the minimum wage were dramatically raised to a point that reflects more the level required to actually support a family (for argument sake only; we still acknowledge that minimum wage mostly affects first-time and young workers who are NOT supporting families), then we could expect to see the economic impact predicted. At some wage point, this is no longer controversial, but simply obvious–as with other realms, if the TRUE economic price of something goes up the overall demand WILL go down.

     

     

  • Guest

    In my admittedly limited experience (I am 45) the only people I have known who worked for minimum wage have been teenagers working part time.

    One aspect of this issue which Mr. Fitzpatrick's article reminded me is that many of us don't work to live, we live to work. We don't order our job situation to best support our family situation; we order our family situation to best support our job situation.

    Capitalism without a Christian hand guiding it does not automatically produce the expected results.

    In generations past, one could reasonable expect, if one graduated high school and was reliable and sober, to marry and earn enough to raise a family on one income. This is no longer a reasonable expectation.

    In generations past, one expected that in the future technology would increase leisure time and improve standards of living. This, too, is no longer a reasonable expectation.

  • Guest

    One thing that seems like a red herring in the discussion of a ‘living wage’ vice a ‘minimum wage’ is weather or not those people earning such a wage need it in order to live.

    The reason I say that is because it only side steps the issue with regards to weather their is and weather the government should enforce a living wage.

    It entirely neglects two problems.

    1) even if 90% of the people earning a minimum wage were not ‘head of household’ types that does not argue for the elimination of the law only the modification of it. ( for instance why not say you are required to pay a minimum wage to anyone claims themselves as a dependent on the w-2 form and make it a felony to claim yourself as a dependent if you do not rent your own a residence ( which could be verified along with your identity at the time you sign your W-2)?

    2) Depending on how you define a living wage there could be an explicit intention that children over 16 help to suplament the family income.

  • Guest

    I think a living/ minimum wage could be defined as the amount that is necessary to meet ones NEEDS. You need food, shelter water and maybe medical care.

    An education is a privilege not a right or even a need.
    Television , media, computers maybe even electrics other then that necessary for heating are all luxuries.

    Transportation is a need only in the sense that you need a way to work to be able to provide the needs mentioned above.

  • Guest

    I think few of the minimum wage proponents actually know an economic fact about it.   The raising the minimum wage concept just sounds "peachy" to people who "care" about other people without it costing them a thing.  I heard it said once (just a poor paraphrase) that you're a liberal until you start earning money.

    Further, I think it is wrong for people to use support of POLICIES as a litmus test for whether you are a Catholic with a social concience.  Good people can disagree on the best approach to solve social issues like poverty.

    Also, I think that the reason the unemployment rate didn't fall is because undocumented workers were taking the jobs –off the books at low wages–That means Americans fill the minimum wage jobs which might be higher skill jobs now.  For instance, undocumented dish washers earn $4.00/hour while cashiers earn the minimum wage.  (Actually, I'm too stupid to know the exact economic effect of the minimum wage.  I just don't want govco reaching in my wallet by proxy!)

  • Guest
  • Guest

    Making your "minimum wage" depend on your family situation means, for example, if I have two candidates who could do the job, I would hire the one with no family to support, so that I could get the job done for less money.  Those with families to support, tough luck.  We'll just hope they have skills to get a better job.

    What you tax you get less of, what you subsidize you get more of. 

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