What About Morality in Economics? or, Virtue Capitalism and Wage

DSC02073One of the biggest arguments concerning homosexual marriage is that the government cannot allow such an immoral action to occur. Now, I have made my views known (that the government ought not be involved in marriage to begin with), but there are those who believe homosexuality ought to be banned because it is immoral. Likewise, they want to ban abortions due to their immorality, which is something I support. Yet, when confronted with the idea of instituting a just wage for unskilled workers, we’re told that it’s a bad idea. When we point to a multitude of Scriptures that speak of standing up for the rights of the impoverished, we’re told that it’s not our job to push our morality on businesses.

What I’m curious about is why we’re so quick to push morality on some issues, but not on others. After all, study after study after study has shown that low-wages lead to (1) higher unemployment, (2) more government aid in terms of welfare, food stamps, etc., (3) a weaker economy, and (4) the eradication of the middle class. In other words, this is a moral issue that has empirical negative effects; the low wage of the worker down the street does ultimately impact me (unlike homosexual marriage).

Proverbs 29:7 states that the righteous understand the rights of the poor, but the wicked have no such knowledge (the Septuagint goes further and says, “For [the wicked] has no understanding heart for the poor man”). What is interesting is that verse 14 says that a king who faithfully judges the poor will have his kingdom established forever. In other words, the Biblical command for aiding the poor doesn’t stop at private charity (as many conservative Christians claim), but is extended to the government. It is not only extended to Israel, God’s representation on earth, but to all governments. Numerous times in the Old Testament prophecies do we see pagan nations condemned in part for their treatment of the poor; in fact, based on Israel’s multitude of condemnations, it seems that with paganism an apathetic view of the poor often developed.

Now, I’m not advocating that we go out tomorrow and support the government increasing minimum wage to $16 an hour. Good people who care about the poor can differ on the practical applications of such concern. The problem, however, is that many Christians have fallen into the conservative myth about the poor; that the poor and unskilled laborers are in such a position because they are lazy, stupid, and unambitious. If they would only work harder they would earn more. We even point to anecdotal examples where someone we know (or ourselves) started in a minimum wage job and worked our way up. Not coincidentally, such people are typically white and come from a lower to middle class background. That is to say, such people often didn’t suffer under years – generations – of oppression where a fatalistic attitude took hold. We also ignore that upward mobility is declining in America so that even hard workers who earn raises typically stay within reaching distance of the poverty rate for decades.

What I am advocating is that we recognize the issue of hourly wages, or more broadly the widening gap between rich and middle class, as a moral issue and not an economic issue. The Bible also condemns those who gain their money via oppression of others. The Bible never does condemn wealth in itself and even says that God blesses some with material gains. Thus, no one is arguing that we all earn equally, merely that we earn fairly. When you look at places like Walmart where the CEO bring in over $17 million in total compensation (mostly from stock options) while the average employee brings in $22,000, how can a Christian think such a system is just? It becomes even worse when you realize that the stock options and bonuses come from boosting profit gains, but cutting labor costs is the easiest way to boost profit; thus, the CEO’s total compensation reflects the low wage of his employees. Such a thing is immoral.

From the Christian perspective, while there’s nothing wrong with having wealth, there’s everything wrong with having wealth at the expense of others. When CEOs make so much money that they earn at a ratio of 796:1 (in the case of Walmart), we are faced not only with a blatant immorality, but something that is dangerous for a society. 44 million Americans live in poverty. That’s 14% of our nation that lives below the poverty line. That doesn’t seem so drastic until we consider that 80% of Americans face near-poverty. This isn’t the result of economic fluctuations or a boom vs. bust economic model, this is the result of a country facing moral bankruptcy. 

Moving away from the moral argument for just one second, let’s look to the practical reasons why all of this matters. Let’s take a small economic ecosystem and place it in a vacuum, for the sake of a hypothetical. In the middle of America there is a place called Smalltown. Within Smalltown there are farmers, grocers, barbers, police, and the like. It is a typical small town. The grocer owns his company, gets his produce from the local mill and butchers, who in turn get their produce from the famers. Well, one of the farmers struggles for a few years and ultimately has to sell his farm to his neighbor. His neighbor, needing extra workers for his increase in land, hires the farmer to continue working the land. The farmer then becomes a worker and is paid a wage. The owner of the two farms decides that since its his money he put forth, he should get the greater share of the profits. He then earns at a 15:1 ratio to the farmer he just bought out.

The grocer hires the farmer’s wife, but pays her the same at he pays the teenagers that work there. The former farmer and his wife earn about 50% of what they used to earn, meaning they can no longer purchase things they used to purchase. In fact, the local factory that sold farm equipment sees a decrease in orders because one farmer is no longer in business (and the owner of the two farms is consolidating and using his existing equipment for both farms). They cut the wages of their employees and lay off two of the others. The grocer hires one, but can’t afford the other. The grocer then notices that his profits aren’t what they used to be because the men from the factory aren’t buying as much as they used to. He then lays off his teenage workers, keeps his two adult workers, but keeps them at the same wage. Thus, they end up working for longer hours, but at the same wage.

Across the town, because the youth no longer have jobs, there’s a bit of an increase in vandalism, which lowers property values, which in turn lowers income for business owners, which in turn causes them to cut salaries. The teenagers, as they grow up, lack essential job skills, making it more and more difficult for them to find work (even with college degrees) because they’ve never been in the work force. Eventually, the farmer who originally made the money starts to buy out businesses in the area and employee the former owners. He keeps their wages low. The grocer, not wanting to be bought out, gets a loan from the bank to buy out other businesses and follows the farmer’s method; buy a business cheap and then use cheap labor to increase the profit.

Now that 80% of the town is employed by one of these two men, they’re all on artificially low incomes. They can’t afford excesses and can barely afford the basics. In fact, they’ve had to dive in and use the local government’s surplus for welfare and food stamps. This, in turn, causes the government to increase its taxes, which causes the two rich owners to lower salaries (so they don’t feel the effect), which requires more of a need for welfare and food stamps. Thus, the “free market system” actually ends up bankrupting a town and putting more people on government assistance.

Coming back to the morality, one can easily see why the Bible is so adamant on helping the poor. Aside from the spiritual ramifications, there are real world ramifications to exploiting the poor. The economy is not a series of figures, but a dynamic ecosystem that requires a balance. When we cut salaries and hourly pay, we cut what people can spend. The less they can spend, the more we ultimately have to cut jobs. When we increase their pay (the moral thing to do, although there is a limit), they can spend more, meaning they’ll pay more, meaning more profits for everyone else. Imagine if the farmer in the scenario earned at a 2:1 ratio; his wife wouldn’t have to work, they could still afford to purchase what they needed, and the ecosystem would survive relatively unharmed.

It’s not as though Christian business owners are blind to this approach either. Consider that Hobby Lobby pays their full time employees $14 to start. While $14 an hour won’t aid one in obtaining retirement for a single-income home, it will certainly put food on the table and allow one to save for emergencies. And there are other examples of Christian business owners who treat their employees fairly. The best example is the Mondragon Cooperative Corporation in Spain, founded under the aid of a priest, where the CEO earns 9 times more than the lowest paid worker, and about 5:1 with the average worker. While economic fluctuations do happen, the Mondragon worker-owners voluntarily voted to take a pay cut. Overall, however, they enjoy an incredibly high standard of living and happiness in the workplace. Likewise, it has survived and thrived during the economic crisis. What this shows is that when companies treat their employees right, those companies tend to see success irrespective of market forces.

There is a certain cause-and-effect with morality; when one acts immoral, negative consequences are likely to follow. When one acts moral, positive consequences are likely to follow. From a Christian perspective, this is because humans were created with a telos, and the closer to that telos we are, the happier we are. The same rule applies for business; the more Godly a business acts, the better run that business will be.

We are called to help the poor because what we do to them will inevitably affect us. While the top percent of earners won’t feel any negative ramifications, the rest of us will feel them. The eradication of the middle class leads to socialism (where no one wins) or leads to privatized socialism (also called feudalism). It begins, however, with a moral foundation. It is a moral foundation where the government has some responsibility (though not total responsibility) to provide a fair wage for employees. Even if one doesn’t want the government involved, then is behooves a Christian to realize that there is a moral argument here, one that is very strict in Scripture. If we are willing to protest homosexual unions and abortion, then certainly we ought to be willing to protest corporations that fail to pay a fair wage. After all, when Christians have united in the past on Biblical principles, great things have happened. We must abandon our alliance with secular and materialistic approaches to wealth and instead embrace the Biblical approach, which is to pay a fair wage.