Originally posted on my old blog, August 8, 2007:
I find it easier to understand economic (and accounting) concepts by beginning with small — though realistic — scenarios. So here I am opening with a possible living wage scenario, but an intentionally uncomplicated one.
Also, I am at this time making no prescriptions. So nobody get huffy and tell me that I don’t understand the implications of minimum wage laws or what is wrong with our welfare system or any of that. If you must know, my personal opinion is that the living wage issue is far more pressing in certain other countries than it is in the United States. We have social justice problems here, of that I am sure. But primarily they are, in my opinion, of a somewhat different (though related) type.
But today, living wage. And just an introduction to what it seems to be about. That’s all. If it isn’t helpful, other people might have something more useful to you elsewhere.
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Imagine you own a farm. Some of your produce directly feeds your family, and then you sell your excess crops to purchase those things you don’t make yourself. In addition to yourself and your family members, you employ some hired hands to assist you in the work. It’s going well — you and your family have all that you need and enjoy a few extras as well. You consider yourself a successful farmer.
Now one of your hired hands is a guy named Bob, and he’s an ordinary local guy, a good enough worker. He does work that you need done around the farm — if Bob didn’t do it, someone else would have to do it instead. Bob works hours that everyone agrees are “full time”.
You pay Bob the going wage. You comply with all the relevant laws regarding his employment. Bob is happy — even grateful– to have the job you give him, for the pay you offer. Part of your view of the success of the farm is having good workers like Bob who are happy to work for you.
Now imagine that Bob, who does all that you expect of him, and who earns a wage that everyone agrees is fair, does not make enough money. The wage you pay him is not enough to pay for Bob’s basic needs. We aren’t saying “Bob can’t afford an MP3 player” or “Bob can’t eat steaks every week”. Bob’s wages force him to choose between, say, owning a pair of socks, or having a bowl of beans and rice for dinner — he can have one or the other, but not both. If he manages to have both, it is by the charity of others.
Furthermore, it is not some extraordinary personal expense that is causing this problem. His counterparts on the other local farms all share his plight. As a result they, like Bob, suffer physical loss — the toll of inadequate nutrition, shelter, clothing, and so forth. Some kind of aid program is required in order to supplement the farm workers’ wages so that their basic needs are met.
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The essence of the catholic social teaching on the living wage is this: You, the farm owner, cannot count yourself as sucessful, if your success depends on someone else’s deprivation.
CCC 2427: “The development of economic activity and growth in production are meant to provide for the needs of human beings”. An economic activity which is pursued without meeting that end simply is not a successful economic activity.
CCC 2434: “Agreement between the parties is not sufficient to justify morally the amount to be received in wages.” The fact that Bob, and his counterparts elsewhere, agree to the wage, does not mean that you, the farm owner are on solid moral ground.
This doesn’t mean you have to run the farm at a loss. CCC 2432: “Those responsible for business enterprises . . . have an obligation to consider the good of persons and not only the increase of profits. Profits are necessary, however. They make possible the investments that ensure the future of a business and they guarantee employment.”
But what it does mean is that you the owner are wrong to be taking home profits for your own consumption, above and beyond your own legitimate needs, if it means leaving your workers to go without basic necessities as a result.
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Catholic social teaching is, therefore, radically different than the going assumption in the wider culture, that if it’s legal and mutually consented to, it is acceptable.
The reality is that inadequate wages cause physical harm. Poor nutrition, exposure to the elements, unclean water supplies, all these things lead to disease and death. So if your profit model depends on some of your workers not being able to afford the essentials of life, your profit model depends on literally harming another person. That’s wrong. Even if your workers live far away, and are used to this suffering, and everyone else in their city suffers the same and always has — no, you may not profit off their willingness to suffer.
And I think that’s about the heart of it.