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Bainbridge on Minimum Wage

Over at his blog, Stephen Bainbridge has an interesting discussion going on Catholic views on the minimum wage. I have a nit to pick, though, with the nit Stephen is picking withthe Nit Picker about the relationship between the minimum wage and Catholic teachings on just wages (you'll have to go to his site to understand this sentence).

Prof. Bainbridge takes issue with the minimum wage on the followingground: "By setting a floor below which employersmay not go,the minimum wage fails the just wage condition of individualdetermination." It's true that the Catechism says that in determiningwhat is a "fair" or "just" wage, there must be an individualdetermination, and I think it is plausible that, as Prof. Bainbridge obsreves, acollege student working for beer money might be entitled to less of awage than a father of two working to put food on the table. But thatdoes not mean, that, as he puts it, "the minimum wage fails the justwage condition of individual determination."

This might only be true if you thought that (1) the floor and theceiling of the just wage calculation could be determined with precisionsuch that paying someone any more than their just minimum would be aninjustice to the employer AND (2), assuming the first to be true, thestate intended to do an injustice in the case of the overpaid collegestudent rather than accepted the overpayment as an unintendedside-effect of its efforts to ensure the just compensation of thefather of two. Law can never perfectly track the demands of justice,but that does not mean that we can't have any laws. In other words, Ithink Prof. Bainbridge is conflating the need for a case by case determinationof the JUSTICE of a particular wage with the state's legitimate need tooperate on the basis of generalities when constructing prospectivelegislation that it intends to operate to eliminate injustice in thewage market.

We can all think of exmaples of situations in which the minimum wagemight indirectly contribute to injustice (in both directions, sincethere will also be cases where someone's needs are GREATER than what arealistically state-imposed minimum wage could provide without, say,damaging the labor market and leading to a great deal ofunemployment). But, confronted by the even graver injustice of thelaissez faire labor market, the state is permitted to do the best thatit can in combatting wage injustice, even to the point of formulating acompromise, best-guess minimum wage that overpays a few and underpays afew others but does justice in the vast majority of cases. Clearly,the state cannot do it all through the minimum wage. The minimum wageis, after all, just one tool in the quiver, and, for that matter, thestate cannot be expected to perfectly guarantee economic justice. Thestate will, however, have other ways to make provision for those whoare underpaid, minimum wages notwithstanding. But the minimum wage iscertainly one of the state's key tools, and I do think it's incorrectfor Prof. Bainbridge to suggest that its generality somehow runs afoul of theCatechism's teaching on just wages. (I understand that Prof. Bainbridge bracketsthe question of whether CST calls for a minimum wage and is moreinterested in taking apart the Nit Picker's argument, but he does so byarguing that a minimum wage law violates the Catechism's teaching onjust wages, and so he seems to be answering the question he brackets orat least pointing to an apparent inconsistency within CST. I, on theother hand, see no inconsistency; not even a tension.)

I do agree with Prof. Bainbridge's complaint that the Catechism passage citedby the Nit Picker does not do the work the NitPicker says it does: that is, it does not, by itself, rule out Catholic opposition to theminimum wage based on, say, the good faith belief that the minimum wage will not actually help to guarantee more workers receive a just wage (due either to, for example, circumvention of the law by employers or to increased unemployment resulting from the imposition of the minimum wage). But I think some of that work is done by the many, manymagisterial statements over the years on history's lessons about the apparent insufficiency of theunregulated market and the responsibility of the state towork for economic justice in light of that insufficiency. Here, for example, is what the Pius XI said about unregulated markets in Quadragesimo Anno: 

"[T]he right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching."

And:

"But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life - a truth which the outcome of the application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated. Therefore, it is most necessary that economic life be again subjected to and governed by a true and effective directing principle."

And:

"Free competition, kept within definite and due limits, and still more economic dictatorship, must be effectively brought under public authority in these matters which pertain to the latter's function. The public institutions themselves, of peoples, moreover, ought to make all human society conform to the needs of the common good; that is, to the norm of social justice."

More specific to the minimum wage in the U.S. context, the US Bishops in Economic Justice for All said that:

Because work is this important, people have a rightto employment. In return for their labor, workers have a right to wagesand other benefits sufficient to sustain life in dignity. As Pope LeoXIII stated, every working person has "the right of securing things tosustain life" [56]. The way power is distributed in a free marketeconomy frequently gives employers greater bargaining power thanemployees in the negotiation of labor contracts. Such unequal power maypress workers into a choice between an inadequate wage or no wage atall. But justice, not charity, demands certain minimum wage guarantees.The provision of wages and other benefits sufficient to support afamily in dignity is a basic necessity to prevent this exploitation ofworkers. The dignity of workers also requires adequate health care,security for old age or disability, unemployment compensation,healthful working conditions, weekly rest, periodic holidays forrecreation and leisure, and reasonable security against arbitrarydismissal [57]. These provisions are all essential if workers are to betreated as persons rather than simply a "factor of production." . . .

In recent years the minimum wage has not beenadjusted to keep pace with inflation. Its real value has declined by 24percent since 1981. We believe Congress should raise the minimum wagein order to restore some of the purchasing power it has lost due toinflation.

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So what you're saying is that a mere statement by Catholic bishops, none of whom (to my knowledge) have distinguised themselves as econometricians, counts as a "magisterial statement" that, in fact, "rule[s] out Catholic opposition to the minimum wage based on, say, the good faith belief that the minimum wage will not actually help to guarantee more workers receive a just wage"?

Are you saying that the US bishops are not part of the magisterium?I was a little imprecise in the post. I'm talking about people who think those prudential concerns rule out any minimum wage at all. I think there are a number of other statements, besides the U.S. Catholic Bishops, to the effect that wages should not be left to the free play of the market. The laissez faire wage position is a tough one to hold in light of these many statements.For example, Pius XI said: "[T]he right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching."And:"But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life - a truth which the outcome of the application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated. Therefore, it is most necessary that economic life be again subjected to and governed by a true and effective directing principle."And:"Free competition, kept within definite and due limits, and still more economic dictatorship, must be effectively brought under public authority in these matters which pertain to the latter's function. The public institutions themselves, of peoples, moreover, ought to make all human society conform to the needs of the common good; that is, to the norm of social justice."

On further reflection in light of your comment, Stuart, I've decided that I overstated the case a bit. I've updated the post to soften the language and to add the quotations from the commment above. I think that in light of the Church's broad rejection of laissez faire, the burden is on anyone who asserts that, given our particular situation, eliminating the minimum wage would help workers at the bottom (even for the prudential reasons we're discussing). That is, they must either point to some empirical basis for the claim that the market would do a better job, overall, or propose a different set of market interventions necessary to ensure that workers at the bottom get what they deserve. Becuase other state interventions, considered as a whole, might actually do the job better than the minimum wage, I don't think Catholic teachings reflects a commitment to the particular tool of the minimum wage per se (hence my modification of the post). It's more clear about what it's against (the unregulated market) than what it's for. But my sense is that opponents of the minimum wage are not, for example, calling for more state employment programs or transfer payments to take its place. They seem to just want to let the market for wages operate -- see, for example, George Will's recent column on the subject.

Fair enough. It seemed that you were aiming at those who would merely question whether a $7.25 minimum wage (the Democratic proposal) is required by Catholic teaching, not just at that smaller group of people who argue that there should be no minimum wage at all. I'm sympathetic to the concerns that are behind the minimum wage, although I'm also convinced (at the moment) of the simple logic in Milton Friedman's explanation: If you want to help poor people, the minimum wage amounts to 1) a subsidy to their wages, plus 2) a tax on the businesses who employ them. #1 is fine; #2 isn't nearly such an obvious policy solution, and despite the efforts of Card/Krueger and the like, there is still a meaningful debate in the economics community about whether minimum wages have a net positive effect. I would, however, support increases in the EITC, which does seem to be a much more effective way of helping the people who actually need help (see http://gregmankiw.blogspot.com/2007/01/minimum-wage-vs-eitc.html ). In other words, I'd go for Friedman's #1 without #2. Yet it seemed that your original post was claiming that the Church had "ruled out" a position like mine, which seemed a bit surprising. Thanks for the clarification.

I think this post and discussion provides a wonderful example of why many politically and socially conservative Catholics like me get so confused in discussions with Catholic progressives regarding the authority of Church teaching. When a teaching on a moral or doctrinal issue, like abortion, or homosexuality, or female ordination is consistent, clear, precise, and absolute we are told that there is tons of room for disagreement, but when it comes to economic, international, or environmental teachings that clearly involve fact specific inquiry and judgment, suddenly every utterance of every bishop who agrees with your position is sacred writ.Take this issue. You state, confronted by the even graver injustice of the laissez faire labor market, the state is permitted to do the best that it can in combating wage injustice, even to the point of formulating a compromise, best-guess minimum wage that overpays a few and underpays a few others but does justice in the vast majority of cases. Yes, if the is a graver injustice and if your solution remedies it in a way that it does not create even graver injustices. You assume this, it seems to me, without any evidence. Even the fact that the minimum wage has decreased by 24% in real terms doesnt demonstrate this. Labor Department statistics indicate that all wages in real terms have increased by over 100% in the same period. Also, even if there is injustice, the state oughtnt to remedy it by imposing other, possibly greater injustices on others. By definition, increasing the minimum wage takes money from some people, whether they are consumers or business owners, and gives it to other people when the market would not have done so. It is naked wealth redistribution. Moreover, there is significant evidence that raising it reduces employment among those at the low end of the wage scale (particularly among young adults and second income wage earners). Making it harder for many people to garner the experience that will help them earn more that the minimum wage in the future.My point isnt that Catholic social teaching dictates against the minimum wage. I think its a stupid idea economically and does more harm than good (especially to those most vulnerable) in the long run, but I cant say it goes against the teachings of the Church. Neither, however, does it dictate, or even lean toward the opposite position. All of the Churchs teachings on economic issues simply apply principles that we must apply to real situations. The Church does warn against the dangers of overly individualistic free market solutions, but it also warns against the suppression of individual freedom and enterprise of state dominated economic solutions.

"My point isnt that Catholic social teaching dictates against the minimum wage. I think its a stupid idea economically and does more harm than good (especially to those most vulnerable) in the long run"Two thoughts on the minimum wage:1) Why do we never hear any discussion from opponents of the minimum wage on the obvious power imbalance and the reality of exploitation that minimum wage campaigns are, in part, an effort to correct? When the option is a salary or eviction, hunger, etc. there is no rational contract. Employers simply have considerably more leverage at the low end of the wage scale.2) When criticizing the economic sense of the minimum wage in terms of its cost to employers, why are other suspect economic arrangements that happen to benefit the rich never mentioned? For example, (I can back these numbers up with sources if anyone is interested), only 1 out of 100 dollars invested in the stock market makes its way to corporations. The rest is pushing shares from one shareholder to another. In fact, if one accounts for stock buybacks (usually at a higher price that what the company got at the Initial Public Offering, and so coming at a net loss tot the company) and dividends, the stock market usually represents a net loss for corporate America. In the period of 1981 to 2000, fifteen of the years saw a negative cash outflow for corporations in the market as a whole. In fact, the same period saw a total loss of $540 billion. I can only imagine that these losses cost a considerable number of jobs. Why the objection to a minimum wage, but not to the stock market?Also, in case you are wondering, the overwhelming amount of capital, even for publicly traded companies comes from traditional non-public sources (banks and venture capital). Thus, an indictment of the economic rationale of the stock market does not amount to an indictment of entrepeneurial and big business capitalism.

Nice try, Sean, but you tip your hand when you say:By definition, increasing the minimum wage takes money from some people, whether they are consumers or business owners, and gives it to other people when the market would not have done so. It is naked wealth redistribution.Please explain what is significant about -- for the question of wage justice -- what the market would or would not have done and what is wrong with "naked wealth redistribution" within the framework of Catholic Social Thought in a way that does not contradict the authoritative teachings of the Church that, according to "conservative Catholics like [you]" (as you put it), should be entitled to an extremely high level of deference on all moral questions. While you're at it, please explain to me why a decline in the real value of the minimum wage at the same time that all other wages are going up supports your position that increasing the minimum wage is neither justified nor helpful.FInally, please point me towards your "significant evidence" (WSJ op-eds don't count) that raising the minimum wage raises unemployment to such an extent that it ends up doing more harm than good. The funny thing is that I have several peer-reviewed articles on my desk that say exactly the opposite (that increasing the minimum wage has a very small or a statistically insigificant effect on unemployment and some counterintuitive evidence that minimum wage increases may even increase employment): see, e.g., David Card & Alan Krueger, Minimum Wages and Employment, 90 Amer. Econ. Rev. 1397 (2000); Mark B. Stewart, The Impact of the Introduction of the UK Minimum Wage on the Employment Probabilities of Low-Wage Workers, 2 J. European Econ. Ass'n 67 (2004); Paul Wolfson & Dale Belman, The Minimum Wage: Consequences for Prices and Quantities in Low Wage Markets, 22 J. of Bus. & Econ. Stat. 296 (2004).... What is the basis for YOUR claim?

Eduardo,There are lots of examples of other economists that disagree with you - e.g.Card, David and Alan B. Krueger, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry In New Jersey and Pennsylvania." American Economic Review. September 1994: pp. 772-793Neumark, David and William Wascher, The Effect of New Jersey's Minimum Wage Increase on Fast-food Employment: A Re-evaluation using Payroll Records. National Bureau of Economic Research: Cambridge, MA, 1995.Neumark, David and William Wascher, The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys. National Bureau for Economic Research: Cambridge, MA, 1995. Also, look at the Journal of Economic Education, Fall 2003, which discusses a survey of 1000 American Economic Association members in which about 46% agreed with and only 27% disagreed with the following statement:Minimum wages increase unemployment among young and lower skilled workers.Even this aside, the Dept of Labor statistics indicate that fewer than 7% of workers earn the minimum wage, and that only 2% are 25 or older, and that even fewer than that are heads of housholds. This also doesn't account for the situation where the worker earns tips - which for many account for more than the hourly wage. My own experience has been that my teenage sons are able within hours to get a job earning at least 25% more than my state's minimum wage which is already .25 higher than the one just passed by the House. This in a state with a higher unemployment rate than the national average. But this misses the whole point, which was about the authority of the Church and its teaching on moral and social issues. I said I don't believe Church teachings dictate either for or against a minimum wage law. Church teachings require us to strive for a living wage and to respect the human dignity of workers. I happen to think free markets with lighter touch government remedies - like the earned income tax credit (which is also wealth distribution, but that actually makes a distinction based on need unlike the minimum wage that treats a wealthy suburban teenager the same way it treats a working single mother) - are a better way to accomplish this than a broad sledge hammer approach which has negative consequences. That being said, my whole point was that there can be and is legitimate room for disagreement on this issue, and for Catholics, an ability to do so within Church teachings, so long as we agree on the fundamental principles and outcomes that the Church teaches. That is, I agree with and seek to conform my behavior to the Church's teaching that economic laws and a desire for free markets are not to override our Christian duties to our fellow man and respect for his dignity and labor.But here's the rub. If we reject the parts of Church teaching that don't suit us or our views, like on abortion and homosexuality, but then wax eloquent about authority of Rerum Novarum and Guadium et Spes as demanding our support for specific state sponsored economic programs, what legitimacy is there in that? Why should I, as a Catholic, accept the authority of any Church teaching if I am free to accept or reject all of it?

Sean -- the first article you cite is the 1994 by Card and Krueger. Here is the abstract, which stands for exactly the opposite of the proposition you are arguing (that is, they find that the minimum wage increase in NJ INCREASED employment in NJ relative to Pennsylvania, which had no minimum wage increase):On April 1, 1992 New Jersey's minimum wage increased from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. Comparisons of the changes in wages, employment, and prices at stores in New Jersey relative to stores in Pennsylvania (where the minimum wage remained fixed at $4.25 per hour) yield simple estimates of the effect of the higher minimum wage. Our empirical findings challenge the prediction that a rise in the minimum reduces employment. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent. We also compare employment growth at stores in New Jersey that were initially paying high wages (and were unaffected by the new law) to employment changes at lower-wage stores. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment.A similar finding in Washington State reported in today's NY Times. BY the way, the 2000 Card and Krueger article I cited initially responds to your second article. Your survey of economists, on its face, (1) simply reflects conventional wisdom and not empirical reality and (2) says nothing about the magnitude of the effect, which is as important as its direction, if not more so. In fact, even those studies that have found a negative effect of the minimum wage have typically found a fairly small one (on the order of 1-3 percent for a 10% increase in minimum wage). I agree with you that there is no requirement for a minimum wage, as such, provided that the market is corrected by other means. My point was simply that, given our current and particular context (the relative absence of those other measures), opposition to the minimum wage is, on my view, contrary to the authoritative teachings of the Church, especially when phrased (as your first comment was) in terms of an apparent principled opposition to redistribution, support for which is bedrock in CST. (By the way, I don't see the Republicans who oppose the minimum wage increase calling for massive increases in other government programs (such as the EITC) to fill the gap.)Also, I'll never understand why you conservatives make these two arguments together. From the anti-minimum wage stand-point, either the minimum wage is an insignificant economic policy and raising it will make no difference to anyone (because no one, or very few people, actually receive it) or it is a very significant economic policy that will harm the economy and especially the poor. I don't think you can make both of those arguments at the same time though without risking self-contradiction. On the authority point, I think it is a fair concern, but we just went through this same discussion with respect to the Saddam Hussein execution, so I will just refer you to the comment thread of that post for my answer to you. The short version is that no one argues that Church authority -- even on the teachings they disagree with -- is entitled to no deference or is just one voice among many.

On the economic policy argument, there is nothing inconsistent with the positions. The point made in stating that very few people are affected by the minimum wage (as earners) is that there is not the massive injustice in wages that liberals claim. This does not mean that the minimum wage does not have negative consequences. I will even agree that the impact on the economy as a whole is marginal and in time absorbed and overcome, but it is still a negative impact. Additionally, just as the benefits may only go to a few, the negative impacts are concentrated as well harming small business owners who for competitive reasons cant simply pass this on to the customer, and other low income wage earners. In short, that the problem to be addressed is minor, and there are other, less deleterious ways to address it. In my opinion, the minimum wage is a way for politicians to appear to by champions for the working poor on the cheap. They dont do other things, like EITC changes etc. because there wont be a page one, above the fold NY Times article like there certainly will be a minimum wage increase and they cant include it in a 100 hour legislative push.On the authority front, I found the thread on the Saddam execution very interesting mostly because it is a hard case, even for someone who generally opposes the death penalty. Unfortunately, I did not find your distinction regarding church authority convincing, and it certainly doesnt conform to the traditional Catholic understanding of authority. Your argument, it seems to me, boils down to, I know what the Church teaches, and I will consider it very carefully, reason for myself, and if I have good reasons, I will not accept its authority. You say deference, but you only mean thoughtful consideration. Deference means submission. Magisterial authority is not rooted in the bishops being very smart people with a long history of experience in dealing with moral and theological issues, it is rooted in the Apostolic Succession. It is an authority that comes from the Author, when we substitute our own judgment it is He with whom we disagree.

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About the Author

Eduardo Moisés Peñalver is the John P. Wilson Professor of Law at the University of Chicago Law School. He is the author of numerous books and articles on the subjects of property and land use law.