WAGE
FAIRNESS
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 rsassower@gmail.com See
previous articles at sassower.blogspot.com
