Friday, April 11, 2014

“Looking for the right standard to implement wage fairness,” The Colorado Springs Business Journal, April 11 -17, 2014, 23.

As tax time comes around again, and as the president keeps bringing up minimum wage, it’s time to consider our attitudes towards income, wealth, and inequality.

One of the basic tenets of the capitalist marketplace (Adam Smith) was that a moral code binds the community within which markets operate. Our moral sentiments provide the framework for fairness and help us recognize that we are all in this together. The baker and her vendors and customers will likely trade with each other more than once, so in the long run they must maintain fairness.
Perhaps there is an obvious fairness in selling bread, but as an employee of the baker, is fairness involved in how much you are paid? The federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA) which in 1947 enacted 40cent/hr. standard, increasing it to $7.25 in 2009.

Many states also have minimum wage laws. Some state laws provide greater employee protections and/or higher minimum hourly wage (Oregon’s is $9.10); employers must comply with both. What standard should be used to implement fairness?
One standard is annual earning. With $8/hr., 40 hrs./week, and 50 weeks annually, we are looking at $16,000 (before any deductions) which is where the poverty level is for a household of two (single mother, for example) according to the 2014 guidelines for Medicaid eligibility. For a single person the poverty line is $11,670.

On the other extreme of the income spectrum we have entertainers, like Madonna who topped the Forbes 2013 list of the “Top-Earning Celebrities,” and who made around $125 million in one year (7,812 times the minimum wage). Is “income inequality” even relevant here?
Among athletes, the golfer Tiger Woods remains a steady top-earner with estimates of $80-$100 million annually (tournaments plus endorsements). Though Alex Rodriguez’s (NY Yankees) 10-year contract of $275 million has just been surpassed by Miguel Cabrera’s (Detroit Tigers) contract of $292 million, they pale by comparison to Woods’ annual earnings. Can we compare their incomes to minimum-wage earners?

Hitting closer to home, what about the CU-Buffaloes’ Mike MacIntyre who earns $2.4 million plus additional allowances to coach a notoriously losing team (USA Today). Is he “worth” his salary? If not comparing him to a minimum wage-earner, how about comparing his compensation to that of an instructor?
At UCCS full-time instructors (with PhD) are paid annually about $32,000 to teach 8 courses with an average size of 40 students who pay about $1,000 per course. Generating $320,000 in revenue for the university, they receive about 10% of what they “produce.” Will MacIntyre ever “produce” ten times his compensation? Should instructors’ pay be related to minimum wage earners?

Perhaps those who are endowed with super-human talents deserve to be outside the orbit of the discussion over income inequality, but what about those involved in the marketplace?
So let’s move to the business world, where Henry Ford famously (voluntarily) doubled the daily wages of workers in 1914 to $5. It reduced attrition on his assembly lines and lifted most workers into the middle class. What informed this move was neither generosity nor altruism; instead, it was a simple principle that his workers should be able to afford to buy the cars they produced.

While the president is pleading for a $10/hr. minimum wage, the CEOs of the largest 500 corporations in the US got a pay raise of about 16% in 2013 for an average of $10.5 million annually. About 60% of the total came in the form of stocks or stock options. According to the AFL-CIO, the top CEOs’ income was about 354 times that of their average rank and file workers. Is the president wasting his minimal political capital?
Isn’t the marketplace a place where the “fittest” rise to the top and command their fair “share”? Why would anyone want to put the government in a position to regulate how much money one makes? Will this intervention undermine job creation?

Companies whose stock is traded on the exchanges or public universities with state constituencies deserve public scrutiny and government regulation. They embody American values. Is fairness an American value?
The debate over income inequality and minimum wage can be framed as a debate about fairness or about job creation and the growth of the economy; it can be framed in terms of unregulated capitalism or in terms of government protection of basic human dignity and wellbeing. How should we frame the debate?

Thomas Piketty historically illustrates that except for a few decades in the 20th century, capitalism tends to increase wealth inequality (2014). Would Adam Smith worry about this? Would he appeal to moral sentiments to battle inequality? Would he invite instead government intervention?

Raphael Sassower is professor of philosophy at UCCS. He can be reached at See previous articles at

1 comment:

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