Economic Fallacies: "Living Wage"

The "living wage" fallacy says that businesses are morally obliged to pay workers a wage that will sustain their lives.

The idea of an obligatory living wage is an anachronistic superimposition of feudalism upon a modern exchange economy. Serfs had no mobility and no choice but to take what the lord gave them. A living wage was due the serf from the lord. The lord had total control over the lives of his workers.

In an exchange economy, workers have mobility. Workers can take their labor to other employers who will pay more. In contrast to the lord, the employer does not have total control of a worker's livelihood. Compared to the lord, the employer's sphere of activity is limited to effectively organizing the means of production to efficiently produce goods and services, thus creating wealth and opportunities for employment. The worker is a free agent who serves the employer only under the very limited terms of the contractual agreement for the business enterprise. The employer does not have the obligation for the worker's material provision, nor does the employee have any obligation to the employer beyond the contractual work agreement. The employer is responsible for paying a just wage (not a living wage) freely negotiated between non-coerced parties. It is incumbent upon workers to develop skills and experience for exchange in the marketplace that will sufficiently cover material needs.

We know some in society are incapacitated or otherwise unable to earn a living wage. Society is responsible for taking care of the poor. Compassion and mercy must be extended to those lacking sufficient resources to exchange in the marketplace, but that comes from outside the economic calculation of a business contract (and employers are often among those extending compassion and mercy from their own financial resources.) Government taxation for certain kinds of support may be part of the solution. Strong families, churches, and voluntary associations are critical. Business is one institution within society, but it is not the function of businesses to sustain workers' lives. "Business" is not a synonym for "society," nor are businesses feudal lords.

This is not to say that sorting out justice and compassion issues are always simple. Migrant workers go to work for large agricultural enterprises. Their wages are well below what most Americans would settle for in pay. Yet many of these workers endure great hardships, leaving homes and families to earn this low wage. This should tell us something about the conditions migrant workers are leaving to take advantage of these low wages. These people were not forcibly dragged into the fields and made to work. They see these low wages as an economic opportunity.

However, that is not to say that these workers are necessarily truly free agents. Should they have difficulties or their employer become abusive, they have no financial reserves or local support network. Many may be in the country illegally. They are in a highly vulnerable situation. Therefore, workers are reluctant to involve governmental entities. They will endure many injustices instead. Corporations and growers can easily be tempted to use these circumstances to the detriment of workers. My intention is not to minimize the difficulties of such complex justice questions but to suggest that predicating justice on feudal concepts of a living wage is not a helpful place to begin.

Here is a scenario that helps make a point about just wages. You want to keep your lawn mowed and trimmed. Two approximately twenty-five-year-old men present themselves to you as yard care workers. Based on what you have determined, these two men have equivalent skills, experience, and reliability. They provide the same quality of work in the same amount of time. You check around and find that most yard care folks of their quality in your area charge $10-$12 per hour.

Now the US poverty rate for a single adult is $9,973 ($5.00 per hr.) and $26,683 ($13.35 per hr.) for a family of six. In our scenario, the first man is single with no dependents. Allowing for overhead and other expenses, he needs a wage of $7.50 to net the poverty wage of $5.00 an hour ($5.00 wage plus $2.50 per hour for overhead). He offers to work for $10 an hour. The second man is married with four children. Allowing for overhead and other expenses, he needs a wage of $15.85 to net the poverty wage of $13.35 an hour (plus $2.50 per hour for overhead). He offers to work for $16 an hour.

1. Man 1: $10.00 = Single man
2. Man 2: $16.00 = Married man with four kids

Which of these two men are you going to hire? The overwhelming majority of us are going to hire the first man. Why? Because we are heartless evil capitalists, callous to the plight of the second man? No. Because we determine wages and prices based on the value of the services rendered, not on the need of the person rendering the service.

The market signal to man number two is that he must pursue other options to make a better living. If government intervenes in the market to set a minimum living wage at $16.00 so that a family with four children can earn an above-poverty income, then that signal is muted, distorting the decisions people make. Furthermore, what are you and your neighbors going to do? Many will opt to cut their lawns themselves. Some will hire neighbor kids and pay them under the table. Others will opt to cut their grass less frequently and skimp on trimming. The demand for the service will drop. The handful of yard care folks who manage to stay in the market will benefit from the mandate, but many of those who could have been working at $10-12 hour will now be without a job making the poverty situation worse.

Society (of which business is one institution) must have poverty reduction as its mission. But society consists of families, neighborhoods, informal networks, churches, educational institutions, voluntary associations, businesses, and governments. When people are incapacitated from providing for themselves, society needs to provide for folks through its array of institutions. When able-bodied people experience a gap between what they earn and what they need to be beyond poverty, society, with its array of institutions (of which business is one institution), works to help them eliminate that gap. Again, the business contributes to effectively organizing means of production to efficiently produce goods and services, thus creating wealth and opportunities for employment. Businesses are obligated to pay a just wage, which is whatever wage two non-coerced parties agree to. If the wage is insufficient for living, then society (an array of institutions) must endeavor to help that person develop the wherewithal to close that gap.

The living wage places the sole responsibility of closing the gap on employers. Why? What is the rationale? Why should employers be singled out as the gap closers instead of society? When you and I hire lawn care workers, we determine wages and prices based on the value of the services rendered, not on the need of the person rendering the service. Why do we then want to mandate that businesses pay workers more than the value of the services rendered, thus distorting the market by sending false singles to workers about the value of their work and destroying jobs in the process? Forcing employers to pay more than services rendered is state-mandated "charity," except that charity is a freely chosen act in the traditional sense.

No biblical or ethical mandate requires businesses alone to shoulder the responsibility for meeting employees' economic needs.

[Index]

Comments

[Brad Cooper]

Good stuff, Michael. Or should I say "Bingo!"....Peace.

[Peter]

Excellent!! Thanks for clear thinking on what is often an emotion laden and ideologically driven topic.

[Michael W. Kruse]

"Or should I say "Bingo!"

Bingo gets it for me! :)

Thanks Brad and Peter.

[Jim Moss]

I beg to differ. Your analysis makes sense according to the worldly science of economics, but it strikes out when matched up against the Kingdom values taught by Jesus Christ. A few quotes from the Gospel of Luke:

1:52,53 - He has brought down the powerful from their thrones and lifted up the lowly; he has filled the hungry with good things, and sent the rich away empty.

4:18,19 - The Spirit of the Lord is upon me, because he has anointed me to bring good news to the poor. He has sent me to proclaim release to the captives and recovery of sight to the blind, to let the oppressed go free, to proclaim the year of the Lord's favor.

9:10-17 - (The Feeding of the Five Thousand)

10:25-37 - (The Parable of the Good Samaritan)

13:20-21 - This very night your life is being demanded of you. And the things you have prepared, whose will they be? So it is with those who store up treasures for themselves but are not rich toward God.

18:25 - It is easier for a camel to go through the eye of a needle than for someone who is rich to enter the Kingdom of God.

I could list many, many more passages, but the point is clear: Jesus consistently gives priority to the needs of the poor and oppressed. He did not spend time calculating economic formulas and weighing one person's needs against another. He simply met the needs of all with the substantial resources at his disposal.

Taking your example of the two men wanting to cut your grass - one single and one married with four children. What would Jesus do? He would do everything in his power to meet both of their needs. If they were hungry, he would give them food. If they were homeless, he would invite them to stay at his house, no matter how crowded it might get. If they were hurt or injured, he would pay for their medical treatment.

On a more practical note, what do Kingdom values mean in relation to the living wage? It means that business owners are morally obliged to pay a living wage - it's the least they can do. It means that consumers are morally obliged to support companies that pay living wages - and to boycott companies that don't - even if it means paying more for their products. And it means that governments are morally obliged to ensure that these things are happening.

I apoogize for my crassness, but your arguments smack of self-interest and lack of concern for the people that Christ calls on us to reach out to. We are called to give our lives, if we have to, not to defend our own right to make the best business deal.

[Peter]

Jim,

What if I own a small business and cannot afford to pay a living wage? Should I shut the doors of the business? Then everyone loses. What if the prices of the services offered get so high that no one wants to pay for them anymore? Raising labor costs can do this. People are not forced to buy products.

I want everyone to have a living wage. However, legislating a living wage will not achieve this. I think this is Michael's point.

Why don't you interact with the point he makes rather than accuse him of not caring for the poor?

[Michael W. Kruse]

Thanks for your response, Jim. Here are my thoughts.

First, I reject that I idea secular (worldly) vs. sacred dichotomies. All of life is under the Lordship of Christ. We were created to fill the earth and exercise co-creative stewardship over it in community with God. That is our mission and that mission means the formation of governmental and economic systems. The very word economics comes from the Greek word oikonomos, the “household manger”; the household manger being the one who the head of household would leave in charge during his absence to act in his stead.

Part of exercising co-creative stewardship is gaining knowledge and wisdom about how to more justly and efficiently accomplish these tasks. There is no biology taught in the Bible yet I hope you would agree with me that medical science contributes to our knowledge and wisdom about how to leave as healthy human beings. Similarly, by systematically studying human anthropology and our relationship with the material world we can hopefully form more just and healthy economic environments.

Second, I think the restoration of shalom, in all its facets, is the vision of God for the world. Neglect of the poor and the vulnerable is the paramount expression of our fallen existence. There is no economic system given in the bible. Thus, the important of what I wrote above.

Third, where do the resources come from you want to give to the poor? How do we effectively organize ourselves to create abundant resources so we have an abundance to share with the poor? Your comments seem to focus exclusively on the distribution of wealth once it is created.

Also, your comments suggest a static “Zero-Sum game” thinking. Wealth is a static fixed amount. A wealthy person’s wealth is at the poor’s expense. But wealth is not a static fixed amount. Prosperity is dynamic eco-system into which the poor need to be integrated. We do not make the sick healthier by making the healthy less healthy. We make the sick healthier by healing them, just as we make the poor wealthier by integrating them into a healthy wealth generating ecosystem. Our question is not why are the poor poor, and what can we do about it? The question is what creates prosperity and how do we get everyone in on it?

Fourth, there is no teaching in the Bible that says “businesses pay a living wage.” The passage you list must be processed through a hermeneutic to arrive at the conclusion you have reached. It really isn’t my intention to be belligerent here but you are concerned I’ve been co-opted by worldly economic systems. I would reverse the charge. :) I think your perspective and hermeneutic is deeply influenced by liberation theology, which is inextricably bound up in Marxist economics, and yet you perceive yourself as having a biblical “non-worldly” perspective. I say this in part because I know that this intellectual co-option is pervasive throughout seminaries and I hear pastors drawing on this critique reflexively.

I will not be boycotting companies or demanding living wages. Instead I will be pursing the vision of each person becoming a co-creative stewardship of creation with sufficient human financial resources to exchange in the marketplace.

[Peggy]

Well, I certainly can attest to the fact that my husband and I do not go out very often... who can afford over $100 for a night out? After $25 at the movies and $30 for dinner, we will be paying $8.50-$10 an hour for a babysitter for our three boys.

So, the young babysitters in our sphere go without employment from us because we cannot afford $50 for their services (during much of which time the children will be asleep).

I know this deal...I come from a line of championship babysitters. And when I could get a job for $1 an hour, I snapped it up. But the rest of the time, $.50 was better than nothing!

It is more than ridiculous for struggling families to pay young babysitters, who live at home and have parents taking care of them, the minimum wage. Not all of us have grandparents and siblings nearby to watch our kids every now and again.

And, by the way, Jim...Jesus did not relieve ALL suffering in his path... but he did respond to those who made the enormous effort required to make their case known to him. The poor were fed (that day), the blind received their sight (were they fed and clothed as well?), the lame walked, the captives were set free from spiritual bondage. Each of these blessings took care of an pressing immediate need, but they did not resolve all their life challenges.

I am not a heartless person, but caring for the needy in Christ's name is best served up incarnationally and not institutionally; and it is to be according to what you have to share with others in need, not some arbitrary number that removes the incentive to persevere and do one's best without the shadow of entitlement cast about to ensnare others.

Too many times I believe these conversations are taking place between the wrong groups of people...preaching to the choir, as it were. It is not so much about legislating morality as it is being sure to do justice, love mercy and walk humbly with God. And that requires that we take this on a case-by-case basis more often and actually get involved with real people...meeting the root issues rather than the surface needs.

[Michael W. Kruse]

"...but caring for the needy in Christ's name is best served up incarnationally and not institutionally."

Oh, I like that! It even gets the aliterarion thing going. I may have to steal this one peggy. :)

I do think there are contributions to addressing the plight of the poor at a variety of levels in society but the incarnational part is overlooked way too often.

[Andy]

"...but caring for the needy in Christ's name is best served up incarnationally and not institutionally."

Hmm...I agree with Michael that the incarnational part is often overlooked but it would be wrong to assume that biblically institutions are some how less responsible. Clearly in the O.T. narrative God cares deeply about the institutions Israel set up as they give witness to His purposes in the earth. And in the N.T. similar overtones are strongly present.

I am in agreement with you Michael on the "living wage" issue. However, and maybe you will address this later, the church must be intentional in it's prophetic voice to owners/employers and the responsibility we shoulder. In James rant {James 5}, he clearly warns those who hold back wages.

Even though, you are right that the justice issues of wages is complex, definitely our corporate institutions, employers etc need to be brough under serious reflection as well. For example: the growing disparity between CEO salaries and average employees in the US, poses serious challenges. I think both biblically and economically. I see, it will be an US election issue next year as it should be. The problem here is not capitalism but the societies general apathy towards the situation.

my 2 cents~

[Roy Smith]

1 "For the kingdom of heaven is like a landowner who went out early in the morning to hire men to work in his vineyard. 2 He agreed to pay them a denarius for the day and sent them into his vineyard.
3 "About the third hour he went out and saw others standing in the market-place doing nothing. 4 He told them, 'You also go and work in my vineyard, and I will pay you whatever is right.' 5 So they went.
"He went out again about the sixth hour and the ninth hour and did the same thing. 6 About the eleventh hour he went out and found still others standing around. He asked them, 'Why have you been standing here all day long doing nothing?'
7 " 'Because no-one has hired us,' they answered.
"He said to them, 'You also go and work in my vineyard.'

8 "When evening came, the owner of the vineyard said to his foreman, 'Call the workers and pay them their wages, beginning with the last ones hired and going on to the first.'
9 "The workers who were hired about the eleventh hour came and each received a denarius. 10 So when those came who were hired first, they expected to receive more. But each one of them also received a denarius. 11 When they received it, they began to grumble against the landowner. 12 'These men who were hired last worked only one hour,' they said, 'and you have made them equal to us who have borne the burden of the work and the heat of the day.'
13 "But he answered one of them, 'Friend, I am not being unfair to you. Didn't you agree to work for a denarius? 14 Take your pay and go. I want to give the man who was hired last the same as I gave you. 15 Don't I have the right to do what I want with my own money? Or are you envious because I am generous?'
16 "So the last will be first, and the first will be last."
Matt 20:1-16 (ANIV)

I would be interested in anybody's interpretation of this passage. I have always felt the the key is in verse 15; the owner of the business has the right to enter into a contractual arrangement with each individual employee and each relationship is a simple private contractual one about which others have no place to comment.

Another interpretation I have heard from a trade union leader depicts Jesus acting within the Marxist dogma "from each according to his ability to each according to his need"

I believe that the difference between these two poles is that the first is a dispassionate simple commercial transaction whilst the second seeks to intrude into the private circumstances of the employee - which I believe is beyond the limit of the relationship.

What was the main point of this parable and what implications can we draw from it?

[Jim Moss]

Michael - It's a shame that you denigrate liberation theology so much. My thinking certainly has been influenced by it, but it by nomeans is my only influence. I have so much to say, but I think we're coming from such different worlds that it would be fruitless.

For the record, I believe that both Marxism and capitalism have serious flaws, and that Christians need to be seeking a third way when it comes to economics and meeting the needs of all the world's people.

[Jim Moss]

And to all - I am making the assumption that everyone who reads this blog is at least of middle class status. You all seem to be working very hard to maintain the status quo of an economic system that provides you with everything you need and more, but that leaves a large percentage of the population suffering in poverty.

[Michael W. Kruse]

Andy, you wrote:

“…the church must be intentional in it's prophetic voice to owners/employers and the responsibility we shoulder.”

I couldn’t agree more but I think it goes much deeper than this. We need to instill the biblical narrative into people’s lives. I’d recommend my recent four part post on The">http://krusekronicle.typepad.com/kruse_kronicle/imago_dei_the_material_world/index.html">The Imago Dei & the Material World. The short version is that a holistic Christian human anthropology and teleology means communion with God and each other. But it is also means “working the garden” and having stewardship over creation. Dualism has lead the church to frame the Christian life almost exclusively in terms of “spiritual” matters while our material endeavors are purely instrumental to spiritual matters. I’m suggesting that our engagement with the material world (economic activity) is an expression of our ontological nature not an instrumental activity for “higher” spiritual purposes. Our work in the material world is part of our image bearing nature, it is a primary way in which we worship and honor God, and our work is a primary means of witness of the coming Kingdom. I’m not denying the need for a prophetic confrontation in the marketplace but much more urgent is the need to equip the saints for ministry in the marketplace and support them in their ministry as they work through thorny ethical issues. The Mainline church’s response has been almost purely “prophetic” opposition and confrontation while deprecating those in the marketplace.

As to salary and wage gaps between the top and the bottom, I like this analogy. If the wage distribution is a house where the ceiling is the highest one percent and the floor is the lowest one percent, and our concern is justice for the poor, then what is our primary concern? I’d suggest that it is not how high the ceiling is nor is it the distance between the floor and the ceiling. The central issue is how high the floor is. I think it is the zero-sum game fallacy at work to focus on the gap between top and bottom. It falsely leads us to believe that if CEO salaries are taking wealth from the poor.

I think it is important to note what is driving the high salaries. CEO salaries have risen six fold between 1980 and 2003 but market capitalization of the largest corporations have increased by precisely the same amount over the same time period. (see">http://krusekronicle.typepad.com/kruse_kronicle/2007/10/gabaix-on-ceo-p.html">see article) Therefore, compensation in relationship to the value of the assets being managed has not changed. Is this unjust? I’d suggest that whether it is or not, it is not directly related to plight of the poor. The poor need human and financial resources they can exchange in the marketplace. How do we make that happen?

[Michael W. Kruse]

Roy, I’m not sure this passage has much to say directly to economic ethics from this passage. The context seems to be about the final judgment. Nevertheless, the passage has some interesting insights.

First, the parable makes clear that the later workers were not entitled to the same compensation as the earlier workers. The argument that this is teaching redistributionist “justice” doesn’t work. The amount received over and above the time they worked is a gift of the landowner, not a matter of justice.

Second, each worker received justice. No one was under compensated. However, some got more than what justice demanded based on the going rate. They experienced the “injustice” of compassion and mercy from the landowner.

We are told to that true worship is to do justice and mercy. Too often we meld the two as one. They are not the same. Justice requires that we compensate each person according to the economic contribution they made. But we are told true worship goes beyond justice to the injustice of compassion of mercy. Therefore, as individuals and as a society consisting of a myriad of institutions, we are obligated to invest in those at the economic margins. We are to redeem them into stewards of creation, generating resources for themselves and contributing to the economic welfare of society.

[Michael W. Kruse]

Jim, I not expecting to sway you to my perspective but I hope the dialog will at least expose you to an alternative view of the world from someone who has been keenly focused on the issue of poverty for the last 25 years of my life. I have come from a more quasi-liberationist place earlier in my life. I'm not coming at these issues casually.

You wrote:

"You all seem to be working very hard to maintain the status quo of an economic system that provides you with everything you need and more, but that leaves a large percentage of the population suffering in poverty."

First, your comment seems to suggest the zero-sum game fallacy. Someone else’s gain comes at someone else’s expense. This is false. Here">http://krusekronicle.typepad.com/kruse_kronicle/2007/11/economic-fall-6.html">Here is my recent post on zero-sum thinking.

Second, I get the sense that you are presuming that the wealth of middle class America is the norm and that it causes an abnormal condition of poverty elsewhere.

Economist Brad Delong (hardly a neoclassical type) did a study a few years ago where he estimated the worldwide per capita income in inflation adjusted dollars at various points in the past. He estimates it was $90 in 12,000 BCE. By 1750 it doubled to $180. The amount was $6,600 in 2000! The explosive growth also happened during a time when the population grew from less than one billion to more than six billion.

Further more it is estimate that in 1820, about 84% of the world lived on less than $1 a day (in today’s dollars.) By 1970, the percentage declined to 39%. It is presently below 20% and expected to drop below 10% by 2015.

Infant mortality rates (children dying before age 1) throughout human history have been around 250 per 1,000 births. Almost everywhere in the world the number is less than 50 per 1,000 and in all the developed nations it is in single digits.

Life expectancy has been around 40 years throughout much of human history. That rate has nearly doubled in developed nations and most of the rest of the planet is rapidly closely the gap.

Poverty is the historical norm for humanity. We have stumbled upon a cure for poverty in the form of property rights, rule of law, capital markets and free exchange. That cure is spreading throughout the world. The challenge is how to bring evermore people into this reality. The prescription of radical redistribution is the equivalent of treating the sick by making the healthy less well. The road to health for the sick is to get them into the same condition as the healthy.

Third, your comments seem to treat human beings as purely consuming being. Resources are just magically there and must be distributed equally to the population. Resources aren’t just magically there. What is the economic system we use to generate the resources? That is the other half of the equation that must be addressed.

[Jim Moss]

Michael - Your analogy of the house, the ceiling, and the floor is useful. Of course the issue is how high we can raise the floor (how much we can improve the plight of the poor).

And in the United States, the floor had been rising steadily throughout the 20th century - even closing the gap on the ceiling.

But now that we're into the 21st century, it seems that the floor has begun to sink. Depending, of course, on how you shape the statistics, it's not difficult to show that the lowest segment of our population is sinking into deeper and deeper poverty.

It's certainly true in the dying Southern mill town where I do my ministry. I also found this to be true when I worked in inner city Kansas City with homeless families. I shudder to think what things are going to be like for the people on the floor if something doesn't change in our economic system in the next generation or two. Trickle-down is clearly not working.

As for your question about how the poor can build up human and financial resources for the marketplace - first, we meet their immediate needs - food, shelter, medical care, etc. Then we make sure the poor have a fair shake at a good education. The public systems in most inner cities fall far short of this. Finally, we engender inter-class relationships, so that the poor can enjoy the same support systems and safety nets that well-to-do people enjoy.

In short, the ceiling is rapidly rising, the floor is slowly sinking, and those in the middle are starting to feel the strain (but that's another topic altogether).

[Jim Moss]

Michael - I wrote my previous comment having not seen your last one.

Please don't think I have not been exposed to your point of view. I grew up with it and believed it for the first 25 years of my life.

It took a few personal experiences doing minsitry in some very poor places to move my thinking - namely a border town in Mexico, inner cities in New Orleans and Kansas City, and now the rural poverty of South Carolina. So don't think I'm coming at this without an in-depth and up close knowledge of the issues at hand.

Free market capitalism and all that it involves has created a lot of benefits for the human race. And this may be where our viewpoints diverge, but I think the free market has started to turn, that the self-interest on which it is based has gotten out of control. I think that the time has come to evolve it into something different, into a better system - kind of the way feudalism evolved into something better.

I can't tell you exactly what that system is - it's something different than either capitalism or Marxism, and not in a dialectic sense - but in the sense that God breaks into human history and shows us something new and dazzling and just.

[Jim Moss]

Michael - One last note: Looking back over this conversation, I realize there are some serious gaps in what I have presented. I simply have not been able to respond to all the points that have been made agaionst me. I plan on doing a more extensive article on this topic for my blog. I'll let you know when it's posted.

By the way, I do enjoy this kind of spirited back of forth, and I appreciate your willingness to engage me.

[Peggy]

...always stimulating to ponder just what to do with the circumstance wherein we find ourselves!

And, Michael, you're welcome to my humble alliteration...remembering, as always, that most things are not either/or, but a bit of both/and. And for the Christian and the Body of Christ (the church), it must never be primarily institutional. We are the hands and feet of Christ, getting our hands dirty serving and washing feet as well as using our influence toward proper attitudes and responses of all our institutions.

I think, by the way, that this is the third way that the Christians must embrace... the justice and mercy and humility that God requires of us. It's not just that there are to be no wolves in sheep's clothing. There will be no loopholes for the goats who mistakenly think they are sheep!

[Brad Cooper]

WOW, Michael, This threads on fire....some excellent conversation going on.

I've already spent too much time over at Jesus Creed tonight and need to get to bed--so I just skimmed and got some highlights. So if this thought is a repeat, well...so be it:

Meeting the needs of the poor is clearly a top priority in Scripture. (And for those above who misunderstand Michael, it is clearly a top priority for Michael. You can't read Michael's blog posts for very long without picking up on the fact that he takes that far more seriously than most people.)

But the living wage idea will not meet the needs of the poor, it will only make more poor. This is clearly a part of what Michael is trying to say.

BTW, Peggy, some great thoughts...as usual. I appreciate your heart in all of this.

Peace to all.

[Michael W. Kruse]

Jim, I too enjoy the conversation. I hope my comments don’t come off as belligerent. I tend to be a little “tone deaf” at times about emotional impact of my articulations.

As to the poor sinking deeper and deeper, anecdotal information aside, a broad range of measures don’t seem to support this in my estimation. Ten years ago, detailed studies of the poor showed them spending 10-20% more than their official income. That has now reached a level of nearly 100% more than their official income. Non-cash benefits that don’t figure into the poverty level are having a greater impact. I sympathize with “creative destruction” that happens in geographic pockets like you describe in the south as some industries die and others are born but I don’t think on balance it is getting worse. (BTW, if you have a couple of minutes check out the first video linked here on the impact of globalization.) That is not to say we couldn’t be doing much better.

I’d also point out the following declines in the rate of poverty by household type between 1974 and 2005:

Male headed household (Overwhelmingly two parents) = -29.2%
Female headed household = -15.2%
Male independent = -8.2%
Female independent = -11.7%

Yet the rate for the total population was +12.5%. How can the poverty rate go up if it is declining for each type of household? Because the distribution of people living in different types of households has changed.

Male headed households have a poverty rate of 4.4% but the number of these households has declined 13.5%. Meanwhile, female headed households, where the poverty rate is now 31.1%, have grown by 29.9%. These factors can’t be laid at the feet of the economic system.

You wrote:

“first, we meet their immediate needs - food, shelter, medical care, etc. Then we make sure the poor have a fair shake at a good education. The public systems in most inner cities fall far short of this. Finally, we engender inter-class relationships, so that the poor can enjoy the same support systems and safety nets that well-to-do people enjoy.”

You’ll get no argument from me here.

[Michael W. Kruse]

Jim, I think one the critical points of mis-communication comes in terminology. I am using the terms like capitalism and free markets in a more clinical sense, not as a term to describe an entire cultural ethos. To me capitalism includes the following traits:

* Privately owned business enterprises
* Relatively free markets
* Players in pursuit of endless win-win transactions
* Investment of wealth in productive activities
* Long-term future returns oriented
* Circumscribed in a strong juridical framework governing property rights and transactional justice”

The system is largely values and outcomes neutral. It sets rules for interaction but says nothing of outcomes. It takes the values feed into to it and does an amazing job of amplifying them. I think we need to be more about the work of transforming the values people feed into the system and less about the system itself.

Also, I think “self-interest” is one of the most misunderstood concepts in economics. Self-interest is not a synonym for selfish. Self-interest plays an important role but so a host of virtues that must be added to it. See my Capitalism">http://krusekronicle.typepad.com/kruse_kronicle/2007/11/economic-fall-9.html">Capitalism Based on Greed post.

Anyway, I hope you stop back by and I check later for your upcoming post. Peace!

[Michael W. Kruse]

Thanks Peggy and Brad for the conversation. I value your contributions.

[Andy]

Michael you wrote: "The Mainline church’s response has been almost purely “prophetic” opposition and confrontation while deprecating those in the marketplace"

While I find myself resonating with a lot of what you are saying. I think this quote depicts the differences in perspectives we come from. I don't think the mainline church's response has been purely "prophetic" opposition. From my vantage point, the church has mostly accomodated the marketplace, often ignoring it's assumptions. I constantly come across articles from ministries praising capitalism/big business without critique. This no doubt might be a change that has happened in the last 25 years or so. As ministry itself has become big business. So hence my insistence on equipping saints for the marketplace and prophetic witness to the structures.

As to your house metaphor: I think Jim sums up my concerns with this:

"In short, the ceiling is rapidly rising, the floor is slowly sinking, and those in the middle are starting to feel the strain"

You said: "I think it is important to note what is driving the high salaries. CEO salaries have risen six fold between 1980 and 2003 but market capitalization of the largest corporations have increased by precisely the same amount over the same time period. (see article) Therefore, compensation in relationship to the value of the assets being managed has not changed."

You then asked if this is unjust. I agree that compensation in relationship of the value of assets has not changed but my question is not concerning compensation in relationship to assets, it's compensation in relationship to the value of people and therefore the business community. I am suggesting that the reason the middle class is increasingly struggling in the US and the reason globalization seems to be harming the global middle class may be because of the lack of this consideration. {by the way Joseph Stiglitz gave a stinging rebuke of globalization in my birth country yesterday http://bararchive.bits.baseview.com/archive_detail.php?archiveFile=./pubfiles/bar/archive/2007/December/03/Business/49650.xml&start=0&numPer=20&keyword=globalization+unfair+to+poor+countries§ionSearch=&begindate=1%2F1%2F1994&enddate=12%2F31%2F2007&authorSearch=&IncludeStories=1&pubsection=&page=&IncludePages=1&IncludeImages=1&mode=allwords&archive_pubname=Daily+Nation%0A%09%09%09...even if Joseph is being extreme, his cautions are worth serious consideration }

Here's a practical example of my thoughts...Take for example the Apple company:

It's reported that Steve Jobs received compensation around $300Mil for 2006. Not the first off, it's important to understand that there is a cap. Otherwise he could of walked away with $500mil. So how is that cap determined? Apple clearly had a great year. So what if that increased income was distributed more equitably. Now I for one believe the CEO should be making more than anyone else. But my question would be how much do the cleaning people at Apple plants make. What if Apple made a concious decision to compensate in relationship to the value of each of it's employees and business community? What if the cleaning people too could become millionaires? This was one of the founding principles of Sam Walton when he started Walmart and I would argue when capitalism is functioning at it's best. Checks and balances driven by society that bolster the middle class and defers to the poor.

Anyways this post is way to long...my apologies~

[Michael W. Kruse]

Andy, you have a long way to go before you can match me as the king of excessively long comments. :)

First, I erred by not being more specific about what I meant by “Mainline” with a capital “M.” I was referring to those denominations in America that belong to National Council of Churches club, like the United Methodists, Presbyterian Church (USA), Evangelical Lutheran Church, etc. I should have been more specific. I agree with you that there are significant segments of the church that uncritically embrace whatever is blowing in the cultural wind.

Second, there are two ways we get ahead economically. We can earn more or things can cost less (or at least less than they otherwise would have been.) Wages for non-supervisory production workers have been stagnate from the late 1970s to late 1990s but they have been rising again since that time. In the meantime, a great many consumer goods have been getting cheaper or the prices rising less rapidly they the would have without globalization. I’m aware of Stiglitz take. I think computer technology has also had a major impact on increasing productivity without necessarily benefiting workers. I just not convinced we are in a catastrophic collapse of economic standards when you fact both wages and cost of living together.

I’ll address the CEO question in a separate comment.

[Michael W. Kruse]

The way Sam Walton or Bill Gates made their employees millionaires was not by taking less of salary in order to pay other workers more. They paid their workers market wages but also gave the ownership in the corporation through stock ownership plans. They then managed the companies so well that the company’s stock multiplied in value many times over that is how the employees became millionaires, not through salary redistribution. Therefore, it is important for corporation find the best CEO they can so that everyone makes a lot of money. If hiring a CEO at $50 million dollars gets you an appreciation in your stock portfolio of a million dollars by the time you retire, but the a CEO hired for $100 million gets you an appreciation of 2.5 million dollars, then why do you or I care how much the CEO made?

Also, let us be clear what we mean by “more equitably.” Every definition of equity means holding one thing the same while other things vary. If by equitable we mean everyone getting about the same income, then we are saying we will pay people unequally according to the economic value they contribute to the enterprise. If we mean people being compensated according to their economic contribution, then we are saying we will pay people with unequal salaries. What is the moral or economic justification for the first form of equitable distribution within the context of a corporation? These are the questions I’m asking.

[Jim Moss]

For those who are interested, I have posted a more formal response to Michael's article on my blog:

http://disciplineforjustice.blogspot.com/

And a quick side note on whether the floor is rising or sinking. At this point, it seems that one can find good statistical evidence to make either claim. It all depends on perspective. From my perspective, its definitely sinking.

Here in the rural South, we have lost both of our major industries of agriculture and textiles. The level of poverty at the bottom is getting scary, and there is a shameful lack of a public safety net. Our country is so large and diverse, entire regions in crisis can get lost in a sea of statistics and generalizations which suggest that everything is going well.

[RonMck]

Michael
You definition of capitalism is a good one. The problem is that most people think of the system that operates in the united states as capitalism. The problem is that the US economy is very different from what you describe as capitalism.

I think the technically correct name for the US systems is "fascism", which is an economy based round collusion between business and the state. I can understand why Americans are reluctant to use the F-word, but agriculture is maintained by government subsidies. The fastest growing sectors are education, health and defence, which are all increasing contolled and funded by government. The Fed system looks after the interests of the bankers. The anti-trust laws look after the interests of big business. Pork barrel politics look after business everywhere. This is fascisim, not capitalism.

State enforced poverty relieg of the type that Jim Moss adcocates is just another manifestation of fascism.

If capitalism in the form that you define were to come to America, you would have absolutely enormous change. Most likely the poor would be better of too.

[Michael W. Kruse]

I had a history professor on my Master's thesis committee at Kansas State University twenty years ago named Robert Linder. He wrote a short article (unpublished I think) called “Fascism with a Friendly Face.” His thrust was that America is not, nor has it ever really been, in any danger from communist ideology. Fascism is the real threat. He saw the threat of government in collusion with business, “benevolently” controlling more and more of people’s lives.

One of the things I find curious is that so many anti-business types try to regulate business more and more even as they try to get corporate money out of politics. Big business loves regulation! It costs them money but if they can keep there hands in the regulatory process it becomes an effective means to create barriers to entry by other firms. Each increase in regulation compels businesses to compete in the political arena to protect their interests. It just creates greater collusion.

I’m not quite ready declare the USA fascist but I think you are right that if totalitarianism is ever a threat it will be from a fascist angle.

[RonMck]

The important point the debate on this post is that you are defending an ideal and Jim is attacking the US system. You are not discussing the same thing.

[Jim Moss]

This conversation is about living wage, and whether employees have a moral obligation to provide for the welfare of their employees.

Personally, I don't think the US is anywhere near being a fascist state - I feel pretty darn free, myself - but I do think we are losing our sense of community, our sense that we are called to look out for the welfare of one another and not just for ourselves.

What better way to look out for others' welfare than to make sure that anyone who works an honest day's labor can provide a living for themselves and their families?

Let's not make this debate about more than it really is.

[RonMck]

Jim
You sound pretty free. But you seem to be really keen to take freedom away from employers.

[Michael W. Kruse]

Jim, I've been remiss in getting over to your blog to comment. I hope to do so Friday.

You wrote:

"Let's not make this debate about more than it really is."

But this just my point. It is much more complex than this. You are only addressing the distribution side of the economic equation. What about the production side?

I'll probably say more about this in a comment at your blog but I think you may not have picked up on the critical distinction I'm between justice (mishpat) and mercy (checed). Economic justice requires that an employer to compensated and employee according to his/her economic contribution. When we some one unable to earn enough to live on then we are to "love mercy" (Micah 6:8) and draw on the resources of the community to find ways to elevate this persons earning potential to contribute to exchange in the community.

An employer may well chose to pay an employee beyond what he/she is contributing in production to help that employee but this is not economic justice. It is economic justice supplemented by the "injustice" of mercy. The underskilled worker has a claim on basic needs from society but he/she does not have a justice claim on wages he/has not earned from an employer.