Minimum Wage, Living Wage by jAPU0Zk


									Minimum Wage, Living Wage

Should a Catholic support minimum wage legislation? At first glance, this looks like an
easy call. Catholics should be concerned for the poor. Many poor persons occupy
minimum wage jobs. If there is a minimum wage, or if the existing minimum wage is
increased, these poor persons will receive more money through wages and therefore be
better able to improve their lives.

But the reality is more complicated than that. Perhaps the most basic principle of
economics is the law of supply and demand. By this law, the first effect of increasing
the price of something is to decrease the demand for it. For example, if a store raises the
price of a product, it can expect that fewer people will buy it, just as when something is
put on sale, more people will buy it.

To increase the minimum wage is to increase the cost of unskilled labor. The immediate
effect of this, therefore, is to decrease the demand for that labor.

Suppose a small business has a discretionary budget of $1000/week to hire part-time help
for work which is important but not essential. At a minimum wage of $5/hour, it hires
10 persons working 20 hours a week. But if the minimum wage is increased to $10/hour,
it can hire only 5 persons on the same budget. Raising the minimum wage will improve
the lot of the 5 persons who are retained but harm the 5 who are let go.

Something similar holds for businesses which hire workers at minimum wage as part of
their essential operation, such as fast-food restaurants. Such businesses can help all its
workers only if it passes on the added expense of the increase to consumers. But suppose
the business environment is so competitive that it cannot viably do so? In that case it
will close and perhaps reopen in another state. Or it will pay for the increase in minimum
wage by denying a perhaps much-deserved pay raise to its middle-level managers. In
both cases, many workers will be harmed, not helped, by an increase in the minimum

Economists have discovered a variety of indirect, unexpected consequences of the
minimum wage. For instance, it seems that an increase in the minimum wage causes an
increase in the high-school dropout rate. The reason is that, to the extent that you make
jobs for unskilled workers more attractive, to that extent such a job seems more desirable,
to a young person, when compared with staying in school.

In light of these and other considerations, it puzzled me when the Massachusetts bishops
recently issued a statement in favor of a minimum wage increase. “More low-income
workers will be able to improve their own and their family’s quality of life,” they
claimed, contrary to what basic economics would suggest. But, more importantly,
support for the minimum wage is not a matter of the Church’s social teaching. The
bishops have authority to state the relevant principles, but the prudential application of
these principles to social life falls within the legitimate competence of the laity.
One wonders whether many Catholics do not support a minimum wage, because they
confuse it with the notion of a living wage. The Catechism expresses this important
principle of Catholic social teaching as follows: “Remuneration for work should
guarantee man the opportunity to provide a dignified livelihood for himself and his
family on the material, social, cultural and spiritual level, taking into account the role and
the productivity of each, the state of the business, and the common good” (no. 2434).

It’s easy to pass minimum wage legislation, and in doing so we may deceive ourselves
into thinking that we’ve done something about the much more important matter of a
living wage.

The problem of the living wage presents itself to us in Massachusetts today as this: in
most parts of the state, it is impossible to support a family on the income from a single,
typical job. A family in which the parents remain open to children, and which refuses to
let their children be raised by strangers—and which therefore tries to live on a single
income—will typically be living below the poverty level. They will be unable to afford
parochial schools. They will need to live in the poorest and most dangerous parts of
town. They will barely be able to afford basic necessities for their children, such as shoes
and sneakers.

Such families, I would maintain, are the true poor in Massachusetts, the ‘poor in spirit’,
who attempt to live by the teachings of the Church in generosity and self-sacrifice.

It’s a bit more difficult to help such families than pass minimum wage laws. Deep social
changes are the reason for their plight, and therefore only deep social changes can
ultimately remedy the problem. A father making a single income cannot compete, in the
real estate market, with childless, contracepting couples who have two incomes to spend
on housing. A mother who makes great sacrifices to stay at home to raise her children
has no resources to compete with parents who opt for putting their children in daycare—
and who additionally receive state assistance and tax benefits for doing so.

Tax legislation which rewards stay-at-home moms would be a start at addressing this
problem. But Catholics should above all be honest that the problem exists and take steps
in their own lives to remedy it.

Michael Pakaluk is a professor of philosophy at Clark University. He lives in
Cambridge, Massachusetts.

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