More on Catholic Social Teaching and the Living Wage

My previous post which touched on the issues of 'living wage' and open borders seemed to touch off a lot of interesting discussion, some elements of which required a new post to really flesh out.

Some years back I was discussing politics with a senior co-worker, someone who lived in an million-dollar home in the Santa Monica Mountains, and hired a yard guy, a pool guy, a maid, etc. to keep it up for him.

"This 'trickle down economics' thing is idiotic," he announced. "Why do they think that giving the rich more money will help anyone other than the rich?"

"So if you and your wife both lost your jobs," I asked, "would you keep the yard guy and the maid, or would you start to mow your own lawn and vacuum your own house?"

Now, I mow my own lawn, and we clean our own house, and that's not merely because I still make less than a third of what this guy made, but also because I take a certain old-fashioned American pride in taking care of my own homestead. But the point I'm trying to illustrate is what strikes me as a two-fold economic truth:

1) Many job niches rely, for their existence, on economic disparity. (If we all made exactly the same amount of money, probably no one would have a maid.)
2) Certain economic laws will make themselves felt, no matter how good one's intentions may be.

I may have just made my old co-worker sound like a rich jerk -- and he could be one at times. But to give him credit, he also took a lot of interest in the people who worked for him (though since at the time I was making an eighth of what he did, it seemed awful lord-of-the-manor-ish to me). He was the kind of guy who still went to the same barber that his father had gone to, and gave the guy a twenty dollar tip every time. And he'd searched out a maid who would work for him directly, because he didn't think it was fair that places like Molly Maids paid their people so little.

In that sense, he was a perfect example of trickle-down economics. I, on the other hand, am much less helpful to the rest of the economy. We do all our own yard and house work. My commuter car is over ten years old. We almost never eat out, and we try to keep excess buying to a minimum.

Why all of this anecdote?

One of the big issues for those who are big into Catholic Social Teaching, especially as regards to economics, is the "living wage". The idea is that it is unjust to hire someone and then pay them less than the amount of money it would take to support their family at a decent level of human dignity. I see what's being aimed at with the living wage idea, but I have a couple of issues with it. First of all, there's the question of what level of life a "living wage" is meant to support. It seems to me that most people who use the phrase generally mean a mainstream American middle class life, with a single income, a stay at home mom, and a number of kids. (This may seem pretty normal among Americans and to an extent Europeans discussing all this -- but it strikes me as important to recall that this level of existence would be considered fabulously wealthy at nearly any other time or place in history.)

There's another concept that often gets mixed up with the "living wage" which is the "just wage". A just wage is a wage that accurately reflects the value which the employee creates. So for instance, if an employee at a furniture workshop is single-handedly turning a $100 pile of lumber into a $800 dining room table -- one would imagine that his just wage would include a fairly decent portion of the $700 in gross profit that he helped create. If it takes him ten hours to make the table, but his employer is only paying him $5/hr, we probably have a problem here in regards to just wage.

Now, the above example of the table-maker is a situation dealing with craft. And I think this is an important distinction to make, because I think there's a tendency (and perhaps not a surprising one given history) of some expressions of Catholic Social Teaching to treat all manufacturing work as if it were craft.

Now, by "craft" I mean work that meets the following criteria:
-It turns a set of raw materials of much lower value in a finished product of significant value strictly through the creativity and skill of the craftsman.
-Success relies on significant skill and/or time investment, such that another (largely untrained) worker could not be substituted into the process with little loss of productivity or quality.
-The design of the finished product is, in detail or in whole, the work of the craftsman.

In a situation that meets those criteria, much of the value of the finished product is created by the craftsman, and so it clearly is a matter of justice that the craftsman receive the majority of the profit from the sale of his work.

One of the difficulties with craft-made work, however, is that many people are not very good craftsmen. Also, crafted products take a long time to produce, and so are very expensive. A successful "middle class" (to the extent the term pertained) farming family in the 1870s might bring in a tailor once or twice a year to make clothes for the family, with the result that each person had perhaps two everyday outfits and one Sunday outfit to last (along with the left-overs of past years) throughout the year. You might also buy a single pair of every day shoes to last each year -- if that often. Thought of in cost-of-labor terms, these items were incredibly expensive. You're probably talking roughly the same cost that bespoke clothes still demand: $300-500 for a shirt; $3000+ for a suit; $300+ for shoes.

I'm not a fan of the "buy tons of clothes at WalMart for under $10 a piece and throw them away like toilet paper" approach to things, but you can see why "clothe the naked" was a much more frequent need in a pre-industrial society than our own. Mass production means that when we (as a middle class family) pack up a bag of donations for St. Vincent de Paul, it contains shoes that are worn, but still quite intact, and jeans that may be a little frayed at cuffs of pockets, but are still solid (indeed only beginning to look "distressed" enough for your average teenager). But when it would take a skilled cobbler several days of work a produce a single pair of shoes, the poor really did find themselves wrapping their feet in rags, rather than wearing the old tennis shoes of the middle class.

What mass production does is reduce the amount of time and skill required to produce a finished product. Let's go back to our table example. What if, instead of a craftsman who takes unfinished lumber and makes a table, we have an assembler who takes a set of pre-cut, pre-finished, numbered parts and bolts them together to make a table. Perhaps it takes him 30 minutes to put a table together. And the people back in the factory were also doing simple, repetitive tasks such as feeding unfinished pieces of wood into trimmers, assembling standardized pieces, etc.

While it might take months or years of training for a craftsman to learn to do his trade with maximum skill and speed, a new worker factory-style table shop might only take one day to train and be eminently replaceable. Standardization has allowed the creative skill in designing a table once to be used to produce any number of exact copies.

Similar techniques are employed in service industries. If you go into a McDonalds (not something I would recommend, but if you do...) you encounter a checker using a cash register that uses pictograms of the products in order to avoid not merely the need of mathematical knowledge, but also of good language skills, and a cook who is specifically expected not to deviate from the by-rote method of preparing the whole dingy catalog of fried delights.

This means that you can expect food to taste the same in all McDonalds, and that when the employees quit without notice (or simply don't show up) it's easy to move people around and bring new employees in. The process of standardizing fast food cooking and selling has not only removed from the employees the responsibility of deciding what to cook and what supplies to order (and the pitfalls of unpopular food, waste and bankruptcy that lie therein, and do in so many small, independent restaurant owners) but has also allowed the restaurant to hire unreliable staff without destroying the operation in the process.

Is this a good thing? Well, it's hard to say. I don't like the approach. It's not the kind of business I would want to run. But, the fact is (as least so far as my observation would seem to suggest) there are a lot of unreliable people in the world: people who have a tendency to show up a couple hours late for no terribly good reason, or quit without notice, or just tend to fool around a lot at work and not follow instructions well.

So the quandary, from my point of view, is that standardization allows a company to create service or manufacturing jobs which manage to keep the company moving along more-or-less forward while at root being very low value jobs: jobs requiring little skill or commitment. The just wage for such a job is, arguably, pretty low. Low enough that if a head of household is making that wage, he isn't going to be able to support his family at a decent, middle class level. However, the reason that a just wage for that work is so low, is that it's a job that is not very productive and requires very little responsibility. So my tendency is to think that if you want to be the head of a household, it's your duty to find a job that is sufficiently responsible and productive that its just wage is enough to support your family.

(I'm not denying that there are employers who perhaps get away with not paying a just wage for the work they get -- but I certainly don't think it's universally the case with low wage jobs that the wage is not commensurate to the work.)

Now, if you turn around and insist that you pay a living wage instead of a low, just wage in all these positions you do two things: you fail to provide any incentive for people to assume more responsibility and productivity and actually earn more rather than simply being given more, and you also cause what is effectively inflation.

Say you mandate that everyone at McDonalds be paid at least $15/hr (at a full time rate, that 30k, which is a pretty base-line household income in most parts of the country.) Now you can do one of two things: you can get rid of half the staff and expect the remaining staff to be more productive to cover for having fewer people (which increases unemployment if it happens on a wide scale) or you can raise the prices to make up for it. Say you raise the prices. Now instead of paying $5 for a value meal, you pay $12. Many of my co-workers eat fast food of one sort or another for lunch every day rather than bringing left-overs. That means that their cost per month would go from $100 to $240. Now I would imagine that in at least a number of cases, that would mean that they'd decide to scale back on eating fast food, and eat leftovers or food from the grocery store instead. Unless someone raised their wages as well, they couldn't afford to pay 2.5x as much for lunch as they used to. So fewer people would buy fast food. Which would in turn hit the fast food places again, and they'd need to either raise prices higher (which would further decrease demand) or cut costs. Hint: the biggest cost for most businesses is paying their employees.

The current frequency with which people buy fast food and other services and product produced by low-wage labor is a result of the relative imbalance between the incomes of the customer and the provider. If you want to pay the provider more, you need to either increase your employee productivity (and trim some employees) or bring more money in by charging more. And yet, you can only bring more money in by charging more if your clientele makes more money, you increase the value of your service to them (thus making them reluctant to stop buying despite the increased cost), or you find yourself a more well-healed clientele.

My preferred response to all this is to buy fewer products and services (and do more things for myself) but on the things that I do buy, try to buy them from slightly better venues which sell better things and pay their people better. However, I hesitate to suggest that everyone must do this because a) I realize I can only do this because I make a certain base-line amount of money to start with and b) if everyone did this it would leave those people who for whatever reason are low productivity workers by nature out of a job. If everyone took my approach, many low skilled and low reliability workers would be even poorer than they are now, although those up to building skills and being reliable would make more. And since I'm hesitant to say that's better, I find myself hesitant to make sweeping suggestions on reforming the economic order.