If you want a veneer of moralism on your economic policy, send in the bishops.
In recent testimony given to the U.S. Senate Committee on Health, Employment, Labor and Pensions the Bishop of Stockton, California, Stephen E. Blaire, argued for an increase in the minimum wage on the grounds that a just wage is necessary to promote and protect human dignity.
“Work has an inherent dignity,” said Bishop Blaire, “so just wages gained from work support that dignity. Insufficient wages violate it.”
His words jibe with the teachings of medieval philosopher St. Thomas Aquinas. Aquinas believed that goods held an objective value, and selling a good for more than that objective value would be unjust. So the theory of just price holds that a good or service has, well, an objectively just price. Purchasing or selling a good for anything but the established just price violates justice.
The trouble is, the only true just price is determined by the desires of buyers and sellers. Not the priest. Not the statesman.
In other words, the theory of a just price prompts the question, “Who decides what price is just?” Economics outgrew the theory of a just price during the Enlightenment and again in the late nineteenth century. Economists William Stanley Jevons, Léon Walras, and Carl Menger all revolutionized economics by focusing upon subjective valuations. All people have different preferences. For example, Joe wants to buy a candy bar with his dollar while Mary wants to buy a Coke with hers.
All people have the inherent ability to rank their preferences in order of satisfaction. Scarcity, being a fact of nature, forces us to make such preference rankings. Since we cannot satisfy all of our desires, we must choose some over others. The very act of choosing one preference over another implies a ranking and reveals which good or service is more satisfying to the individual.
If value is subjective, then each person values goods differently. Any one person or group of people cannot establish a “just price”—and matters don’t change in the case of labor. The natural interaction between the buyer who wants to get the most for the cheapest price, and the seller who wants to sell the least amount for the highest price, will form a happy median called equilibrium. Equilibrium assumes there are multiple buyers and multiple sellers, all of whom are having that same set of natural interactions. Equilibrium serves as the price determined by simple supply and demand.
Apply this logic to wages. Arguing for just wages is the same as arguing for just prices. In that line of thinking lays the idea that someone’s labor has a defined value. Many potential employees value and rank their time the same way they rank everything else. Some people value their time more than others. Those who do not value their time highly will be willing to work for less than those who do. The wage is simply the price established between the buyer of labor (the employer) and the seller of labor (the employee). Wages cannot be established by fiat—nor by any other method than the agreement struck between the employer and employee—without running afoul of each party’s preferences. The ethicist must surely have something to say about the “justice” of tossing out the preferences of two parties to an agreement.
In short, Bishop Blaire cannot know what the just wage is, and neither can any government official. While the Bishop is correct that some level of dignity comes from work, he is wrong to assume such dignity comes from wages. The profits a shoemaker earns from creating value for his customers can offer a measure of dignity too. But would the shoemaker feel dignity if he were to force someone to purchase his services for more than they were worth to the customer? What dignity is there in that?
Government’s increasing the minimum wage parallels the shoemaker forcing his customers to pay that higher price. Only customers can’t simply choose another shoemaker. If workers feel any dignity from a minimum wage increase, it is a small sort of dignity—one that can be bought very cheaply indeed in exchange for politicians’ votes.
Returning to the matter of wages (prices): Who decides what is just?
The free market answers this question through the actions of people engaged in voluntary exchange. The seller bids prices up while the buyer bids prices down. Agreement implies mutual benefit. Dignity comes from hard work and from pride in serving others well. Earnings accrue to those who do their work successfully, creating value for others. Backdoor dealing demeans labor. Prosperity cannot be legislated; it must be created and earned.
Minimum wage supporters use coercion to forbid people from honestly competing with their labor—and, sadly, they do it in the name of dignity.