Does Minimum Wage Equal Just Wage?

COMMENTARY

(photo: Shutterstock)

The current administration is again advocating for an increase in the federal minimum wage. Also, voters in five states — Alaska, Arkansas, Illinois, Nebraska and South Dakota — approved raising wages in state ballot measures at the Nov. 4 midterm elections. Many Catholics, along with the U.S. bishops, support the increase. Some Catholics, however, are asking whether this is a prudent move for the nation’s recovering economy and, more importantly, for the poor.

Recent studies suggest that an increase would do little good and, perhaps, more harm. Surprisingly, principles of Catholic social teaching lend credit to that finding.

The argument in favor of an increase in the minimum wage is that it will help the poor. It is predominantly the poor who work at the minimum wage, so the claim goes. Increasing it will provide them with more money. More money for the poor is obviously a good thing.

Catholics arguing for the increase cite the Church’s teaching on a just wage. A just wage, sometimes called a “living wage” or a “family wage,” is a wage that provides the laborer with enough remuneration to live and support a family in a manner consonant with human dignity. An increase in the minimum wage would go toward securing a just wage for more people.

The arguments against the increase in the minimum wage often include the claim that such a raise will result in greater unemployment. If an employer has a fixed budget, a sudden and significant increase in operation costs will likely result in layoffs in order to keep costs down.

This argument makes economic sense, but it has been difficult to demonstrate a significant cause and effect in the real world. Some argue this is due to the fact that the majority of laborers already make more than the minimum wage. When the minimum increases, it affects a small number of businesses. Of those affected, larger employers often absorb the higher cost of labor only to pass the cost on to the consumer. Thus unemployment stays relatively static. Opponents respond by pointing out that increases in the price of goods and services hurts the poor more than anyone else.

But there are more problems with an increase in the minimum wage. The presumption of those in support of the policy has been that most of those who work at the minimum wage are poor. According to David Neumark of the Center for Economics and Public Policy at the University of California, Irvine, this is not the case.

In 1939, a year after the federal minimum wage was established, 85% of those who lived in poor households worked for the minimum wage. By the early 2000s, however, that percentage dropped to 17%. What’s more, 34% of those who work for the minimum live in households where the income is three times above the poverty line.

Neumark is not the only one to point out that an increase in the minimum wage is an inefficient way to help the poor. A 2007 study by the non-partisan Congressional Budget Office predicted that a raise in the minimum to $7.25, which did pass later in 2009, would increase wages nationwide by $11 billion. However, only $1.6 billion would go to poor families.

Another problem with the federal minimum wage includes the confusion between public policy and a just wage. The Church understands the just wage as a concept touches on the nature of labor, human dignity and the obligations of society’s leaders (Catechsim, 2343; Compendium, 302). It is attached to a person and their household and not to a specific kind of work or a class of work. Because people have different needs, what is just for one worker with no children may be unjust for another worker who must support five children on the same wage and at the same job. A just wage is an idea which takes on flesh only once applied to a real family.

Minimum-wage legislation, on the other hand, is a policy solution made apart from a specific family and based on statistics. Raising the wage may mean more money for a small percentage of poor households, but it tells us little about whether that is yet a just wage for those households. Furthermore, if as a result of the policy, the poor suffer layoffs and higher prices, the increase to the wage can do more harm than good.

Questioning the prudence of the increase is not to deny the Church’s teaching on the just wage, for a just wage has more to do with the people earning the wage and their economic situations than it does with a dollar amount mandated by the federal government. This raises another argument against the minimum wage.

Even if the minimum wage was as efficient as its proponents claim, it could be argued that a federal mandate violates the principle of subsidiarity. One of the core principles of Catholic social teaching, the principle of subsidiarity insists that larger authorities ought not do for smaller authorities what the smaller can do for themselves. Federal mandates ought to be careful that they help (subsidium) and not burden or neuter local orders of authority from making decisions for the common good. This helps to protect the autonomy of local entities and to safeguard authentic solidarity (Compendium 185-187).

A federal minimum wage that covers a nation as large and as diverse as ours forces employers to pay wages as though economic realities are the same everywhere. Proposed increases to the minimum wage in Tulsa mean something far different than in Manhattan. To better reflect the principle of subsidiarity, the minimum wage should perhaps be determined at the state or even the city level only.

Opponents of the minimum wage sometimes argue that the state ought not be involved in economic decisions or in welfare. Catholic social teaching clearly teaches that the state does have a role in protecting the working poor and in creating conditions in a society that build solidarity and maintain the common good. However, that involvement must be respectful of all of the principles of Catholic social teaching, and, more importantly, it must work.

Neumark and others argue that increases in the Earned Income Tax Credit (EITC) are a more efficient and effective way of helping the poor. Sen. Marco Rubio, R-Fla., has suggested replacing the EITC with wage enhancements administered by state authorities. Both get much closer to the principle of subsidiarity and support Catholic social teaching on the role of the state in working for the common good with an eye to the poor.

Support for a just wage for everyone is not an optional plank of Catholic social teaching. A just wage is an extension of our belief in the right to life. Support for government involvement in the common good is also not optional. Every pope has defended the state’s role in caring for the poor, even as they have warned against the state’s tendency toward over-involvement.

These planks of Catholic teaching, however, do not require that Catholics support public policies that do not work or which violate other principles of Catholic social thought. Rather, they require that our nation come up with more inventive and efficient ways to help the poor and empower them to earn greater wages, while the state provides a surer safety net.

Omar Gutierrez is the manager

of the Office of Missions & Justice for

the Archdiocese of Omaha, Nebraska.

Oscar Wergeland, “Service in a German Village Church,” ca. 1880

This Sunday, I’ll Be Going to Church. Will You Join Me?

“The Sunday Eucharist is the foundation and confirmation of all Christian practice. For this reason the faithful are obliged to participate in the Eucharist on days of obligation, unless excused for a serious reason (for example, illness, the care of infants) or dispensed by their own pastor. Those who deliberately fail in this obligation commit a grave sin.” [CCC 2181]

Oscar Wergeland, “Service in a German Village Church,” ca. 1880

This Sunday, I’ll Be Going to Church. Will You Join Me?

“The Sunday Eucharist is the foundation and confirmation of all Christian practice. For this reason the faithful are obliged to participate in the Eucharist on days of obligation, unless excused for a serious reason (for example, illness, the care of infants) or dispensed by their own pastor. Those who deliberately fail in this obligation commit a grave sin.” [CCC 2181]