Fair Wages

Much of my reading last year focused on economic justice. I wanted to write something that addressed many of these primary sources. Also it is sort of a pet topic

There is such a thing as economic injustice distinct from committing fraud. Wages can be a source of injustice; however, it is no easy task to assess a just wage. While Marx suggests we eliminate private property, I think the better solution is to accept the market’s poor job of assigning a just wage but to use a social safety net to make the system morally tolerable.

Economic Systems Can Be Unjust

When there is no economic system, any party takes possession of what he or she wants. If more than one person wants the same possession, the strongest will prevail. Rousseau addressed this state, and whether there existed a right of the strongest, by writing, “Suppose for a moment that this so-called ‘right’ exists. I maintain that the sole result is a mass of inexplicable nonsense” The Social Contract, Book I, Section 3. He explains that force has nothing to do with morality. I agree with Rousseau, and so does Jesus. He reserved his blessings for the weak and his curses for the mighty. For example,

Blessed are you who are poor,
for yours is the kingdom of God.
Blessed are you who hunger now,
for you will be satisfied.
. . . .
But woe to you who are rich,
for you have already received your comfort.
Woe to you who are well fed now,
for you will go hungry.

Luke 6:17-26. I do not think this is a tough conclusion that the strong exploiting the weak is not a moral economic system, although I do not know what Ayn Rand or Rand Paul would say. Without regard for these potential objections, let proceed to the next idea.

The next system is one in which any agreement is allowed. In this system, the collective force of the society is used to ensure compliance with the binding agreements. Montaigne recognizes that agreements tend to have winners and losers, writing that “no profit whatever can possibly be made but at the expense of another.” Essays, Book I, ch. 21. Scripture condemns economic systems that exploit the poor. See, e.g., Amos (condemning those who tax the poor); Proverbs (condemning exploiting the poor in court). Indeed, when the Israelites returned from exile, Nehemiah scolded them for engaging in some exploitative property deals that actually sounded like they might be similar to practices of lenders today.

Now the men and their wives raised a great outcry against their fellow Jews. . . . “We are mortgaging our fields, our vineyards and our homes to get grain during the famine.” . . . “We have had to borrow money to pay the king’s tax on our fields and vineyards.” . . . When I heard their outcry and these charges, I was very angry. I pondered them in my mind and then accused the nobles and officials. I told them, “You are charging your own people interest! . . . What you are doing is not right. Shouldn’t you walk in the fear of our God to avoid the reproach of our Gentile enemies? . . . Give back to them immediately their fields, vineyards, olive groves and houses, and also the interest you are charging them—one percent of the money, grain, new wine and olive oil.”

Nehemiah 5:1-12. So we have an Ancient Palestine loan modification. Note, exploitation does not necessarily mean cheating, which is condemned in other places. See, e.g., Proverbs & Micah, Clearing the Temple. This leads me to the conclusion that it would be desirable to have a method to assess whether a wage is fair, beyond simply asking whether either party lied to each other.

An Honest Day’s Pay for an Honest Day’s Work

First, it is worth reaching all the way back to Locke’s comments on work. Locke attributes the creation of private property to the work individuals put into raw materials, which Locke believes were all given equally to all humans. As for the balance of the value, Locke writes, “It is labour then which puts the greatest part of value upon land, without which it would scarcely be worth any thing.” Concerning Civil Government, Ch. V , para. 43. From Locke’s comments a fair wage could be derived from considering the amount value of any service or product and assuming that the vast majority of it should be transferred to the wage earners. There are problems with this conclusion. Not least of which is that Locke was referring to land, and that Locke recognized that property rights have since been set up by conventions and are no longer a direct product of labor as in the natural state.

Adam Smith considers wages more directly in the context of a component of the cost of any item, along with rent and the cost of capital. Smith believes that the market creates two limits on wages. For a floor, “[a] man must always live by his work, and his wages must at least be sufficient to maintain him . . . in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what is precisely necessary for their own maintenance.” Wealth of Nations, Book I, Ch. 8. Marx states it more bleakly, claiming that “[t]he average price of wager labour is the minimum wage, i.e., that quantum of the means of subsistence which is absolutely requisite to keep the labourer in bare existence as a labourer.” Communist Manifesto, Ch. 2. The slight difference between Marx and Smith in defining the minimum possible wage is that Smith assumes that worker can negotiate and as such will not take less than what they need to live on. Marx recognizes the power differential.

Of course, this is only the minimum. Smith also puts forward some expectations for what will actually drive wages. Smith cites five factors in Chapter 10. (1) The job that is more difficult, less desirable, and less honorable will pay more. (2) The job that it cost more or is more difficult to be qualified to do will pay more. (3) The job that has less job security will pay more. (4) The job that requires the public trust will pay more. (5) The job will pay more if success is less certain. I can say that I personally have not found this to be an accurate list. At least, it is not good enough to predict for example the pay received by someone operating a civilian nuclear reactor versus a naval nuclear reactor. Similarly, it doesn’t seem to work for school teachers versus insurance underwriters. It doesn’t work for firm lawyers versus attorneys general.

I would add to this list the amount of money that flows through a given field as a determiner of wage. More broadly, however, I think the list illustrates how difficult it is to quantify what is a just wage. It doesn’t include the social value of the job being performed, and probably a dozen other factors that most people would believe should be a component in determining what one should be paid. So, what is there to do if it is so difficult to fairly compensate people? Marx has an answer.

The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win.

We know a couple things about this idea. One, the violence can by plenty real. Two, the economic losses are tremendous.

I think the best solution is to let the market set the wages. Rather than attempt to address the problem by ensuring fair wages, we should instead put in place a social safety net such that we are comfortable that even if someone is working in a job that should be more greatly compensated, they will not do without being able to live an acceptable lifestyle. This allows us to enjoy the maximum productivity of a capitalist society, without the moral dilemma of disparate compensation and wealth distribution. My idea is not without precedent, even in the Bible. For example, farmers were required to leave behind the grain that fell to the ground for the poor. It was their right to have this grain. Not a matter of charity. See, e.g., Leviticus, Deuteronomy, and Ruth. Thus, the social safety net is necessary for Christians to accept the injustice of wage assignment found in our system.