“Don’t I have the right to do what I want with my own money?” Jesus of Nazareth on labor relations, circa AD 33.
“And whereas conditions of labour exist involving such injustice, hardship, and privation to large numbers of people as to produce unrest…and an improvement of those conditions is urgently required; as, for example, by…the provision of an adequate living wage…[and] recognition of the principle of equal remuneration for work of equal value…” Preamble to the International Labor Organization Constitution, AD 1919.
I believe that both the Fair Labor Standards Act of 1938 and the Equal Pay Act of 1963 were birthed out of two ideals: a reasonable desire for fairness (defined as an equality of outcomes) and a belief that employers have a predisposition for exploiting labor. Our legislators meant well and believed that by such regulations, they would improve the lot of all workers. Though it would be fun to debate the veracity of that, it’s not the purpose of this post. I’m not here to argue about their effectiveness. I am here to argue about their legitimacy in a free market economy.
On January 28, 2014, President Obama will give his fifth State of the Union Address. Rest assured that he will bang the drum of an “adequate living wage” and an increase to the minimum wage. Members of Congress will stand and applaud. Man-on-the-street interviews will find the populace very accepting of the proposal. Proponents for the poor will claim it as another step toward “wage equality”. And employers everywhere will begin estimating how much more they will need to charge for their products once another synthetic wage increase goes into effect.
In a truly free market, employers vie for labor based on market value. If there is a large supply of labor, the price goes down. If the labor supply is limited, the price goes up. It matters not what type of labor is in view, whether skilled or unskilled. For instance, our institutions of higher learning produce more lawyers than the current market demands. So, though the median wage for lawyers in 2012 was around $113,000 per year, it doesn’t mean that 2014 graduates will make that in 2015. Those looking for jobs after graduation often have to settle for posts that are tangential to the legal profession. Many agree to come aboard firms for much lower pay simply to get in the door. Supply and demand, plain and simple.
But who is going to shed a tear for the plight of lawyers? What politician would be able to rabble-rouse the populace over the issue of unfair wages to professionals? Will we see a law enacted that forces law firms to pay a minimum hourly wage to new lawyers in order to guarantee their ability to pay off their school loans and have enough left over to eat? I doubt it. After all, why would lawyers need a living wage?
Though I believe the above argument makes sense, somehow its validity dissolves in face of the day laborer and the minimum wage worker. Emotion overrules reason to the degree that folks who haven’t been paid minimum wage in decades clamor passionately for the need of fast food workers to make over $10 an hour.
I worked in an Arby’s Restaurant in my late teens. I had a coworker who took off to Alaska during the canning season to make some quick money. He had heard that the cannery workers could make $15 an hour (this was in the early 1980s). When he got there, the cannery was on strike. So he wound up working at the Arby’s – for well over twice the minimum wage. Why? Supply and demand. Virginia had a much larger unskilled labor supply than Alaska did at the time. To attract workers to food service jobs, Virginia employers only had to offer minimum wage. Alaska employers had to sweeten the pot to attract workers from other venues. This is how the free market is supposed to work.
But ever since the social upheavals of the early twentieth century, progressives of all stripes have pressed to stipulate what employers must pay, regardless of market conditions. They sold these notions to the employers themselves by claiming that it protects them from competitors who might gain an unfair advantage by paying less for their labor. If everyone is forced to do it, they reasoned, it levels the playing field. All the while, freedom – both of people and markets – bled out more and more.
Jesus’ parable of the laborers in the field was given primarily to illustrate spiritual truths. But contained in it are all the issues of market value, fair pay, labor relations, and employer freedoms. I won’t print the entire parable here, but I would encourage you to pick your Bible up and read it. You will find it in Matthew 20:1-16.
In the parable, a landowner negotiates with a group of men to work in his vineyard for the day. The market value for a day’s work was one denarius and the landowner hired the men for that wage. Supposing that the work began at sunup, 6 AM, the landowner hired additional laborers at 9 AM, 12 PM, 3 PM, and 5 PM. When the sun went down at 6 PM, the landowner paid all the workers one denarius each. I’ll attempt to bring this a bit closer to home.
Minimum wage is currently $7.25 per hour. Supposing that four of the twelve hours would be paid at overtime rates, let’s call the average day wage for 12 hours $102. With this conversion, the average hourly wage result per worker class is illustrated in the table below.
In today’s rhetoric, the landowner’s generosity caused a 1200% economic inequality between the top wage earner and the lowest wage earner. This is obviously unfair. After all, a group of men labored for twelve hours and only made what men who worked for a single hour made. Time to go on strike, file a complaint with the Department of Labor, and get in front of any camera that will listen to how evil the employer is. In swoops the government mandating that all laborers be paid $17 an hour because the landowner can obviously afford it. Furthermore, the landowner is restrained from giving discretionary bonuses. All laborers of a particular class must make the same wage. And if a bonus is to be handed out, it cannot be based on generosity; unless the employer is willing to be equally generous with everybody.
It’s interesting to see what side of this argument Jesus lands on. When the first laborer hired accuses him of unfairness, he says, “Friend, I’m not being unfair to you. Didn’t you agree to work the day for $102? Take your pay and go. I want to give the man that was hired last the same as I gave you. Don’t I have the right to do what I want with my money? Or are you envious because I am generous?” Jesus doesn’t land on the side of fairness, defined as equal outcomes. He lands on the side of freedom – the freedom to use his money to compensate labor as he saw fit.
I’ve worked in corporate America for quite some time now. I’ve known more than a few human resource professionals in my day and have had to dabble a bit in the trade myself. Trust me, if Jesus were a CEO today and pulled a stunt like that on the factory floor, his head of HR would have a heart attack. And the demand for lawyers would go up the week after payday.
 Matthew 20:15 New International Version
 At the time, this was a nominal 12 hour work day. These would be longer hours in the summer and shorter in the winter as regardless the season, the daylight hours were divided equally into twelve parts.
 The math: ($7.25 x 8) + ($7.25 x 1.5 x 4) = $101.50. I rounded up in the text to make more cents.