High
wages, low wages, and morality
By David R. Francis
January 29, 2006
The Christian Science Monitor
It's unusual for a controversial economic issue to be fought on
moral grounds. But ACORN, a public advocacy group, has been winning a
higher "living wage" for workers in state after state, city after city,
by appealing to voters' sense of justice.
"It's probably the best [argument] we have," says Jen Kern, director of
ACORN's Living Wage Resource Center. A decent income is a moral matter
of "fairness," she says. Those who "play by the rules of the game
should be able to support themselves by their work."
"A job should keep you out of poverty, not keep you poor," agrees Paul
Sherry, coordinator of the Let Justice Roll Living Wage Campaign, a
church-based coalition in Cleveland seeking to raise low wages.
According to the father of classical capitalism, Adam Smith, a Scottish
professor of moral philosophy at Glasgow University in the 1700s, the
"invisible hand" of self-interest ensures the most efficient use of
resources in an economy, and public welfare is a byproduct.
Today Americans are mostly content to let market forces - that is, the
law of supply and demand - determine the wage levels for the
multiplicity of jobs, professions, and positions that make the economy
work. It would be extremely difficult for a bureaucratic group to make
detailed, comparative judgments as to the real value of various
occupations and place a specific wage level on each.
But at some point, the extremes in wages resulting from what is called
"free enterprise" begin to violate people's sense of common justice.
They chuckle, then, at the portrayal in a Boston Globe cartoon of two
bosses in a fancy office saying to three workers: "Why should you have
a minimum wage? We don't have a maximum wage."
As it is, an employee working full-time at the federal minimum wage of
$5.15 an hour makes $10,712 a year, about $1,000 above the official
poverty level for an individual ($9,654).
At the other end of the scale, the compensation of top corporate
executives, on average 431 times the salary of a blue-collar worker in
his or her company, is widely seen as excessive. Critics often use the
word "obscene" - a moral term - to characterize the tens of millions of
dollars they get.
Capitalism in regard to pay is "out of whack," says Scott Klinger,
codirector of Responsible Wealth, a Boston advocacy group concerned
over deepening income inequality in the nation.
Mr. Klinger maintains that Adam Smith assumed equal power in a free
market among its players. He didn't see the "enormous concentration" of
economic and political power that has enabled the privileged to set the
rules of the system. "Supply and demand is not the operative force," he
says.
The Securities and Exchange Commission has just proposed that
corporations disclose more information about executive compensation
beyond salary, such as pensions and other perks.
"A small positive move," says Klinger. He advocates, among other
things, that the directors of a firm should include not just executives
from other companies, but also representatives of labor, the community,
and others to better assure that business decisions take account of
"stakeholders" other than company shareholders.
So far, though, rising income inequality has not aroused sufficient
public indignation to prompt congressional moves to stem it.
Ms. Kern maintains it is "immoral" that so many Americans get up in the
morning, work a full day, and then are paid so little they have to
choose "between medicine, food, heat, or light."
ACORN campaigns with that theme have won such wide public support that
18 states and the District of Columbia have enacted higher minimum wage
laws, from about $6.15 to $12 an hour.
But the federal minimum wage hasn't been raised in nine years. Action
would directly help 7 percent of the workforce.
A think tank study released last week found that between the early
1980s and the early 2000s, the incomes of the country's highest-income
families climbed substantially. Middle- and lower-income families,
though, saw only modest increases in income and have begun to decline
again despite relatively low unemployment. So today the income gap
between the richest and poorest one-fifth of families is "significantly
wider" than it was two decades ago, note the Center on Budget and
Policy Priorities and the Economic Policy Institute, two nonprofit
groups in Washington, D.C.
In past tough years, Congress has shared in economic suffering by
cutting its own pay - in 1932 and 1783, for instance. Not so now. Since
members of Congress last voted to boost the minimum wage, they have
raised their own pay by 23 percent. Last October, the Senate voted 51
to 49 to hike the minimum wage, but it would have taken a supermajority
of 60 votes to pass.
"I wonder what Adam Smith would have to say about that?" Klinger asks.
Soon Congress will consider making permanent a Republican tax measure
that would fully repeal the federal estate tax - a tax that only hits a
rich elite. This year, all estate assets worth less than $2 million per
individual (and double that for a couple) are exempt from the estate
tax. Only huge estates, one in 370 (0.27 percent), are subject to the
tax.
Mr. Sherry of Let Justice Roll hopes that the "momentum" building at
the state level for a legislated boost in the pay of the poor will
carry over to the federal level. "People are seeing it more as an
ethical, moral issue," he says.
Contrariwise, Kern sees "no hope for a federal minimum wage increase
with this Congress and this administration."