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Human Nature: Catholic Thought and the Sciences/Just Wages

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The Compendium of the Social Doctrine of the Church states:

Remuneration is the most important means for achieving justice in work relationships. The “just wage is the legitimate fruit of work”.
They commit grave injustice who refuse to pay a just wage or who do not give it in due time and in proportion to the work done (cf. Lv 19:13; Dt 24:14-15; Jas 5:4). A salary is the instrument that permits the labourer to gain access to the goods of the earth. “Remuneration for labour is to be such that man may be furnished the means to cultivate worthily his own material, social, cultural, and spiritual life and that of his dependents, in view of the function and productiveness of each one, the conditions of the factory or workshop, and the common good." The simple agreement between employee and employer with regard to the amount of pay to be received is not sufficient for the agreed-upon salary to qualify as a “just wage”, because a just wage “must not be below the level of subsistence” of the worker: natural justice precedes and is above the freedom of the contract.
#302 (emphasis original)

Several aspects of this teaching are difficult to put into concrete practice.

Defining "the means to cultivate worthily..."

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The challenge of defining the level of income necessary "to cultivate worthily [man's] own material, social, cultural, and spiritual life and that of his dependents" is a topic proper to the social sciences. This teaching is also subject to the criticism that it is too vague to be given concrete content, or that it is impossible to reconcile with the subsequent caveat "in view of the function and productiveness of each one." The "level of subsistence" cited as the lowest pay level that may be justly agreed to by a worker is easier but still difficult to define. (See Martin Ravallion's "poverty lines" entry in the New Palgrave Dictionary of Economics)

Achieving Just Wages in Practice

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The teaching that factors other than "the function and productiveness of each one [and] the conditions of the factory or workshop" should affect wages is difficult to reconcile with the economics of wages, which highlights the unintended consequences of legally restricting wages to be higher than the unregulated market wage level (see George J. Stigler's "The Economics of Minimum Wage Legislation" in the 1946 AER). Setting higher wages than the market wage level may leave some workers unemployed (See Charles Brown's handbook chapter, "Minimum wages, employment, and the distribution of income" ) and especially disadvantages those who may be less productive but are willing to work for lower wages out of their need (See "The Distributional Impacts of Minimum Wage Increases..." by Ahn, et al.). Regulating wages also may lessen the economic incentives for individuals to develop their capabilities through education and training (though there is also an argument that minimum wages could increase on-the-job training, according to Acemoglu & Pischke's 2001 "Minimum wages and on-the-job training" - see also Acemoglu's 2001 "Good Job's Versus Bad Jobs").

As a result, ethicist Prof. Martin Wilkinson (in his article, "The Ethics and Economics of the Minimum Wage" ) concludes that "at worst, the minimum wage is a mistake and, at best, something to be half-hearted about." Indeed, most economists favor alternative policies for increasing the incomes of low-paid workers, such as negative income taxes (e.g. the Earned Income Tax Credit in the U.S. - see Prof. Karl Scholz's entry for the New Palgrave Dictionary of Economics: "Taxation and Poverty") or other programs providing goods in-kind (e.g. food vouchers or free health insurance - see Dr. Martin Ravallion's entry for the New Palgrave Dictionary of Economics: "Poverty Alleviation Programmes"). However, such policies are in tension with Catholic doctrine on the role of government. Another policy approach favored by economists is improving educational and training opportunities so that workers may earn higher wages through increased productivity (See Prof. Gary Becker's article "Human Capital and Poverty" in Religion and Liberty.)

Yet the Catholic teaching on just wages is not only relevant to policy but is (perhaps primarily) directed at employers and other individual actors. Anyone can volunteer as a tutor or contribute financially to organizations that improve educational opportunities. Employers can pursue human resources strategies that focus on investing in workers (see Prof. Michael Naughton's article, "Distributors of Justice: A Case for a Just Wage").

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