Can a free enterprise economy in the world’s most prosperous nation guarantee a living wage job to every full-time worker? California is embarking on a grand experiment to find out. The U.S. federal minimum wage is $7.25 per hour—less than $15,000 per year for a full-time worker. But states are permitted to legislate higher ones, and most (29 at last count) have done so. Now California Governor (and erstwhile Jesuit novice) Jerry Brown has signed legislation that will increase the state’s minimum wage to $15 an hour by 2022. This will assure every full-time worker in the Golden State a minimum $30,000 annual salary.
In the United States this has been driven by the “fight for $15” movement, but in fact it is part of a worldwide phenomenon. Income inequality has increased everywhere and policies sharply increasing the minimum wage have made headway in nations like France, Germany and Britain.
Many economists are sounding alarm bells. Cassandras predict massive job loss with every minimum wage hike, and have seldom been vindicated. However, they say this time is different: the increases under consideration push minimum wages up to half the median wage, a seldom seen level. They suspect that many workers may not have skills worth the new minimum wage on the open market and that investors will take their money to states or nations with a better return, leaving the worst-off workers unemployed.
These economists may be right. For Catholics, though, the living wage is not on trial here—our economy is.
Our free market economy has produced many wonderful things: rapid growth, amazing wealth, remarkable products. One thing it has not produced is a living wage for everyone willing to work, something Catholic social teaching unquestionably demands. As Pope Leo XIII expressed in Rerum Novarum: “Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner.” If the market wages are insufficient for this purpose, Leo continues, labor organizations and government regulation are in order to remedy the problem. Our embrace of the free market is conditional; the living wage is an imperious and ancient dictate of natural justice.
In the years after World War II, labor organizations in the United States did magnificent work limiting economic inequality and ensuring that workers received their fair share of the wealth they produced. Economists have taken to calling the period “the Great Compression” because of the narrowing income gap that characterized the period. But in the past half-century declining unions and increasing globalization produced stagnating wages for working people, even during economic growth and prosperity.
The fight for $15 is an attempt to address this. I would like to see it succeed. Certainly some products and services produced by workers at low wages will be less profitable to produce, and investors will withdraw money from these sectors and invest them in others more suited to the new wage structure. If the naysayers are right—that the holders of capital respond to this call for justice by shifting their resources to other markets and leaving workers jobless—we will need to find another way to deliver a living wage to those who labor. Because while the world judges economies by their rate of growth, or productivity, we judge them by their consequences for the least of these.