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?"
"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?"
"What about a vacation every year for the family, say a week at Lake George or out on the Hamptons?"
"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?
No, wait a minute: No.
I feel strongly both ways.