Rerum Novarum Lives On

It is surprising to me that, throughout all of the debates about automation and minimum wage laws in the United States over the past few years, hardly any mention of Pope Leo XIII’s 1891 papal encyclical “Rerum Novarum” enters the dialogue.

Personally, I find Paragraph 45 to be one of the most compelling commentaries on the moral validity of a living wage that I have ever encountered.

In it, His Holiness offered:

“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 through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice.”

The importance of this commentary is that it provides a response to those who advocate, on freedom to contract grounds, that the United States should have no minimum wage. The freedom-to-contract theory argues that, if an adult is willing to accept $4 per hour as a wage, he would only be electing to do so because he believes that is the greatest current opportunity available to him. By American law requiring payment of $7.25 in hourly wages, or even higher in some states, we collectively are saying from our remote locations that we know better than the best interests of the parties actually affected by the agreement. As a practical effect, the same job opportunity that would exist at $4 may not be available at $7.25, and therefore a laborer is left with nothing. And by definition, $4 is better than $0.

The summary of the Rerum Novarum response to this argument, as noted above, is that the only reason anyone in their right mind would accept $4 per hour is because such an individual is acting through necessity or fear of a worse evil. At the $4 price point in America, this is universally true for any self-supporting adult.

In most areas of the United States, a Big Mac costs more than four bucks. Could you really–not theoretically, but really–be able to cope with giving up an hour of your life and not having the most pedestrian of hamburgers to show for it? Collectively, minimum wage laws represent our recognition that paying a wage of $2, $3, $4 per hour represent such a universal non-livable wage that paternalism is necessary to protect our fellow man from becoming a “victim of force and injustice”.

It is interesting to note that Pope Leo does not provide a bright-line definition of what the minimum wage ought to be. Instead, there is the precept that a living wage is what could support “a frugal and well-behaved wage earner.” By implication, this is subjective and highly localized. If someone is 35 years old and has three kids, a higher minimum wage is morally required than from the same applicant who is 18 years and with no family to support.

This aspect of encyclical social teaching requires immense wisdom to execute in practice. If an employer can only pay $9 per hour to earn a profit from labor, should that militate in favor of hiring the most unattached applicant, thereby discriminating against those with greater familial responsibilities? Or does it require hiring the best applicant and accepting negligible profit, if any, as the required exercise in virtue?

In fact, this question has become so difficult to answer that many companies are side-stepping this thorniness by automating the low end of their work-force so that they do not have to make any decisions about hiring individuals near the misery compensation rate for labor. Making hiring decisions with significant trade-offs–either hiring an experienced employee with family obligations at a non-living wage or hiring a less qualified employee at a living wage–can be avoided altogether by installing a kiosk that lets customers punch in their own orders.

Where the law should intercede in this debate is by only enacting a minimum wage that is equal to the level at which a frugal adult wage-earner with no familial responsibilities could support himself. To define the minimum wage at a rate any higher than this would be discrimination against what is minimally morally required to pay some active participants in the U.S. labor market, and therefore, would exceed what should be the minimum wage law’s purpose of barring freedom to contract at the point at which any adult laborer would only be assenting due to fear of a worse evil. To define the minimum wage any lower would, by definition, be below a price point at which any frugal wage-earner could support himself and would be immoral for that reason.