Just Wage Open Forum

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John Henry’s article A Coalition For Me, But Not For Thee was starting to get highjacked by the discussion of a just wage, mostly because of me, so I offer this now as a place to openly discuss what a just wage is.  I don’t mean ideally in terms of a wage that provides for the family, leisure, and savings, but down and dirty numbers.

For example, let’s look at some budgetary numbers I deal with.  Renting a two-bedroom apartment in Laramie, Wyoming, costs about $600, with all utilities except phone and internet paid for.  Two people can eat comfortably, though not fancy by any means, at $50 a week.  (No fast food, no eating out, but still fairly healthily, if one doesn’t mind oatmeal every morning, spaghetti and ramen often, and only two pieces of fruit a day.)  Because Laramie is small, one can travel back and forth across town quickly, and thus gas only comes to about $60 a month.  But throw in $40 every three months for an oil change, and $40 twice a year for new wipers.  We’ll leave major repairs under emergency funds.

Now let’s consider appointments, namely dental and eye, which run about $120 a pop, but only needed a total of six times a year (hopefully).  Let’s throw in car insurance, at $100 a month.  Let’s throw in health insurance, at about a comparable price.  Let’s also throw in a phone, at $60 a month.  Next is toiletries, at about $40 a month.  Also is clothes, which we do well with at about $100 each, twice a year, and shoes, at $100 each once a year.  And then consider about $20 a month on laundry.

The total amount is $15,920.  If we throw in $100 a month for miscellaneaous spending, $100 a month for emergency funds, and $50 a month for charity, this comes to $18,920.

The next step is going to raise some contention, but I’m going to assume 60 hours a week, not 40, because that still allows time for leisure and it isn’t unreasonable to hold one 40-hour-a-week job and another 20-hour-a-week job, when one is trying to scrape together enough money to get by.  I’ll also assume 50 work weeks, and 15% taken in taxes.

I come up with $7.42 an hour as a needed wage.

What other factors would people like to throw in, or how do these numbers change in different places?  And should minimum wage start here, or should a couple work to get by until one or the other starts earning this hourly rate?  How many hours of leisure should a person have a day?  When you count 8 hours of sleep, 3 hours for personal time (showers, meals, etc), and 12 hours a day working, 5 days a week, that leaves one hour a day, but the weekends free.  If you consider 10 hours a day, 6 days a week, then that’s 3 hours a day, with one day free.  Is it reasonable or unreasonable to ask for more leisure time?

I mean for this to be just an open discussion of what, numerically, seems reasonable.  I appreciate any CST guidelines thrown in, but we can argue all day about ideals, and I would appreciate seeing numbers other than what I work with.  I hope follow this up later with a more theoretical discussion of a just wage.

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  1. 60 hour work weeks, particularly spread between two different jobs, is feasible but tiring for a healthy young person without dependents. However dependents make this type of schedule difficult to maintain, particularly given the frequency of divorce and/or illegitimacy in the U.S. Childcare can be very expensive, and generally requires an adult working less than 60 hours a week.

    That said, it’s interesting that the $7.42 figure is in the ballpark of what the minimum wage ($7.25) will be next year. My understanding is that only about 1-2% of the U.S. workforce makes minimum wage, although that percentage may increase when the minimum wage is adjusted upward. Numbers aside, I am looking forward to your discussion of the just wage in CST.

  2. Hmm…Not the resounding turnout I’d been hoping for, but then, I can’t expect people to hang out here every hour of every day, either.

    What I failed to make clear in my initial posting is that what I was calculating was a living wage for Laramie, WY, for two people.

    What I intend to discuss with a post that will hopefully be up tomorrow is that there is difference between just wage and a living wage, between just wage and minimum wage, and a living wage and minimum wage.

    I hope we hear more from other people about what they view as a living wage where they live, especially from Michael and Mark. This is, or at least seems to be, an important topic for them, and I’d really like to have them contribute a little before I post my next article.

  3. Couple thoughts:

    What a good living wage is varies a huge amount by part of the country. I recall $8/hr feeling very comfortable in Steubenville, Ohio — but then I was paying $400/mo for a three bedroom duplex which I shared with three other working adults.

    Living in Los Angeles, it could be a lot rougher. Car insurance was $200/mo and medical insurance was $500/mo through my work for my wife and (then one) kid. Rent was $1000/mo for a one bedroom apartment.

    I think you were right to calculate an income and a half for two people. Sometimes that’s the husband working a job and a half, sometimes it’s both working, but it’s certainly not unreasonable.

    More generally:

    It seems to me that the real measure of a “just wage” has to do with the value of one’s work. It’s wrong for an employer to pay you less than a reasonable percentage of the value that your work creates for him — especially if paying you only a tiny percentage of the value your work creates results in putting you in poverty. (If you create a lot of value, it may be just to pay you pretty small percentage — though people often want more. In a given month I can point to a few million dollars in revenue that are directly attributable to my actions at work, and my wages are a pretty tiny percentage of that, but I’m nonetheless paid a comfortable enough wage I don’t think I could complain that getting a small percentage is “unjust”.)

    This creates, I think, dual responsibilities for the employer and employee: The employer has a responsibility to design jobs which are of enough value to pay a decent wage — and the employee has a duty to, if he’s a head of household or wants to be, be economically valuable enough to earn a decent wage through the value of his actions.

    My favorite example in this regard is the position of “greeter” at Wal Mart: I think Wal Mart is remiss in having a job description which contributes virtually no value to the company. But I also think that a worker who is a provider has a duty to be able to do something more valuable than being a greeter at Wal Mart. If the father of a family is working as a greeter and having trouble making the bills — the problem is not so much that he’s not being paid enough by Wal Mart as that he shouldn’t be working that job as a head of household.

  4. This creates, I think, dual responsibilities for the employer and employee: The employer has a responsibility to design jobs which are of enough value to pay a decent wage — and the employee has a duty to, if he’s a head of household or wants to be, be economically valuable enough to earn a decent wage through the value of his actions.

    You’ve hit the nail on the head. Using economics positively and not normatively, we can set aside “justice” for a moment and say that a market wage is simply the value marginal product of labor (p*dq/dL).

    Now what does that mean if we’re not just “neutral” economists but Catholics who care about social justice? It means exactly what Darwin said: there is a dual moral duty at work. The employer has to be more realistic about the value and productivity of the work being provided, and the employee has to have the sense to know what constitutes valuable and productive work. Unfortunately, the reason we see guys in chicken suits on the street corner advertising stuff is because neither party is getting it right.

  5. a just wage? that would be whatever my employer and I agree upon for me to work for him, with no coercion involved. And it doesn’t matter how I spend my money, or if I agreed upon to little, or how many bills I have.

  6. Anthony,

    Actually the Church has ruled that a just wage is not just solely determined by whatever you and your employer agree upon, with or without coercion. Due to certain factors on the part of the employer and the employee, it is possible for the employee to agree, willingly and without coercion, perhaps due to ignorance, on a wage that is far below what the position is actually worth. Now, it is one thing if you’re accepting a much lower wage as a matter of volunteer work or charity, but it is something else if, say, you accept a position worth $20/hr for $8.50/hr, thinking that is a great wage (because you’ve only made $5.15 up until then), and the employer really could pay you $20/hr, then that’s a different story.

    Granted, there are hundreds of different variables to consider, and I believe that, for the most part, the employer/employee contracts are more or less just.

  7. Due to certain factors on the part of the employer and the employee, it is possible for the employee to agree, willingly and without coercion, perhaps due to ignorance, on a wage that is far below what the position is actually worth.

    It’s not clear to me how one determines “what a position is worth” without reference to a free labor market.

  8. I don’t believe I ever suggested that you could. The assumption that an employer and an employee can make a just contract as regarding the employer’s wages depends upon both having full knowledge of the market forces, and full access to the market. The assertion that, at times, it cannot simply be left to a private contract between employer and employee is due to the recognition that most people will only have an imperfect knowledge of the free market, and only partial access to the market itself.

  9. BA,

    I think that in an open market, wages will tend to hit the maximum value possible given the value of the work done.

    So I guess I’d argue that an unjust wage would most often be the case of some sort of market breakdown — either a segment of employees not knowing the real market value of their work and being cheated into working for much less; or employers using some sort of market restriction or force to make employees work for a wage well below what the market would set if allowed to function freely.

    Does that sound reasonable?

  10. The scenario envisioned, I take it, is that a man takes a job from employer A at $10 an hour not knowing that another employer, B, is offering $20 for a similar position. I doubt that this sort of thing happens very often, and if it ever did, the simple solution would be for the guy to quit his job and take the position with A.

    Determining which jobs are comparable to each other is, of course, a tricky business (I say this as someone who could be making double or triple my current salary by taking a “similar” job to the one I have now; yet I’m not going to do so because there are other non-monetary considerations in play).

    As for market restrictions making wages lower than they should be, I would certainly agree that the restrictions are unjust, at least in most cases. But given the restrictions, I’m not sure you can say that the agreed upon wage is unjust (at least if implicit in the idea is the notion that it’s immoral for an employer to pay it).

  11. There can be conditions, such as a monopsony employer in an isolated region, where the equilibrium wage is below the market wage. A minimum wage in situations like that can help workers.

  12. BA,

    I think I’d envisioned something more like: Joe normally pays his technicians at Joe’s Auto Shop $20/hr. He charges his clients $70/hr and has no shortage of work in sight. However, when he hires a new technician Tim, he tells him “Of course, this position only pays $15/hr” because he notices that it’s been a couple months since Tim lost his last job and Joe figures he probably doesn’t have many options. Tim works well and a couple months later finds out he’s making 25% less than the other workers, but Joe tells him, “We only do pay reviews once a year. You’re welcome to leave if you don’t like it,” knowing that there aren’t any mechanics near by hiring.

    Now, I guess you could argue this is the market wage, if Tim is not in fact able to go find another job. However, it does strike me that if there’s no economic reason why Joe has to pay him less, other than that he thinks he can get away with it and make his business more profitable, he’s arguably cheating Tim, and in that sense behaving immorally by paying an unjust wage.

    I don’t think it’s the kind of thing which external entities like governments can do a good job of preventing, so I wouldn’t support any kind of regulation to prevent that kind of occurance, but it does seem to me that Joe is treating Tim unjustly and thus arguably sinning.

    On the market restriction question, I might envision something like:

    The large manufacturing concern in a small town has gone under, and the town council puts out big tax and funding incentives to bring in a new company. Company ABC somes in and sets up a widget factory, part of their deal being they get the town council not to give building licenses to any other manufacturers to come into the town for at least three years. (Illegal, I would hope in the US, but let’s imagine.) ABC then announces it will pay $5/hr in its factory, which is a quarter of what the old bankrupt employer in town paid. The labor of one worker creates $100 in value for ABC per hour. But since people would have to move out of town to get manufacturing jobs elsewhere, enough people grit their teeth and go to work in ABC’s factory that they’re able to run a booming business with huge profits.

    I’d argue that’s pretty clearly of treating workers injustly and thus immorally — but all that has to be done to prevent that at a government level is not provide local monopolies to employers. There’s not a need to legislate wages, but rather to allow employers to compete.

    Do those examples seem to show clear cases of unjust wage paying?

  13. I think this discussion, where we connect the moral wage to the current free market value of the labor, is off basis. Why do we have to take the current market value as a given? Maybe the current market value of the labor is unjustly low.

    Look at it from the point of the consumer. Is it moral to purchase goods or services paying a price that we know provides for inadequate wages to those who have labored to produce or deliver the product? As a consumer, should we not be willing to pay for things knowing that their producers are not compensated enough so that they can have an adequate living? I think that justly compensating those who produce our goods should be a major factor in determining what we are willing to pay for an item.

    You are treating the matter as if the market value of labor should determine just compensation. I think that what we need to do is to make sure that the morally just wage determines the market value of the labor.

  14. Michael Enright, I have to politely but fervently disagree with your statement. You more or less put the cart before the horse, by immediately judging that wages ipso facto are unjust. You also make a broad, and I think invalid, assumption that just because wages are inadequate to live on, they are unjust.

    I will make a quick statement here, and more in my upcoming post, that not all jobs are intended to be positions one makes a living from, and thus the wages offered for those positions can both be just and inadequate to make a living. For example, I would not expect someone to make a living being a bag boy at Safeway. I would expect that to be a position intended for teenagers looking to earn some money while accruing job experience and a history.

    Honestly, if I felt a company engaged in dishonest business practices by paying its employees unjustly, then I would be morally obliged to shop elsewhere. However, I’m not going determine the price I’m willing to pay for a product based only on the wages paid to the company’s employees. The price I”m willing to pay is based upon how much I need an item and how much I can afford to pay for it. Judging whether or not a company pays just wages is separate issue and depends on regional economic concerns, the jobs themselves, and host of other issues.

  15. I have to say that you are taking my statement out of context. I never said anything about teenage workers, although they may have a family to take care of themselves. There are plenty of grown adults forced to do work, and sometimes very hard work, that pays very little. One great example of this is migrant labor.

    Secondly, I never suggested that you determine the price based solely on the wages that are paid. You put that in yourself. I am not advocating for the labor theory of value.

    I also never judged any wage as unjust. That would have to be a specific call based on each particular job.

    All I made was a modest claim. My modest claim is that when purchasing something, and we know that the employees are paid inadequately, that we choose another provider and be willing to pay more so that the laborers are paid adequately. That is one of the factors we should look at when considering what we are willing to pay for an item. We shouldn’t be looking to pay the cheapest prices in order to be cheap if we know that means for inadequate wages. (I did not define what an inadequate wage is). The market itself should advocate for fair wages.

  16. I beg forgiveness, then. I did read more into what you wrote than you actually put there. To my mind, there is no separating a just wage from market forces, and what you were saying seemed to suggest (I only say “seemed to suggest”, not that you did so) that we determine numbers beforehand (how, I don’t know), and then compare how the world lives up to that standard.

    Your reply states that I was making an issue out of practically nothing (though there are minor details I could quibble over with you). Mea culpa.

  17. Anthony,

    This is directly from Centesimus Annus, an encyclical by Pope John Paul II, looking back at Pope Leo XIII’s encyclical Rerum Novarum from the perspective of a hundred years:

    8. The Pope immediately adds another right which the worker has as a person. This is the right to a “just wage”, which cannot be left to the “free consent of the parties, so that the employer, having paid what was agreed upon, has done his part and seemingly is not called upon to do anything beyond”. It was said at the time that the State does not have the power to intervene in the terms of these contracts, except to ensure the fulfilment of what had been explicitly agreed upon. This concept of relations between employers and employees, purely pragmatic and inspired by a thorough-going individualism, is severely censured in the Encyclical as contrary to the twofold nature of work as a personal and necessary reality. For if work as something personal belongs to the sphere of the individual’s free use of his own abilities and energy, as something necessary it is governed by the grave obligation of every individual to ensure “the preservation of life”. “It necessarily follows”, the Pope concludes, “that every individual has a natural right to procure what is required to live; and the poor can procure that in no other way than by what they can earn through their work”.

    If you don’t like it, I’m sorry. Or maybe you’re thinking I meant “dogmatically defined” when I said “ruled”, which I did not mean. I meant that popes, after long deliberation and consideration of the teachings of the church, came to the conclusion that I then just passed along in my comment.

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