Matt Salisbury is a writer, designer and entrepreneur living in San Diego, CA.  He's currently a Partner and Chief Creative Officer at Yellow Line Media, a content marketing company. Matt's a devout Catholic and believes the social encyclicals make business sense.

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SHOCKER: Paul Krugman Doesn't Understand Dignity

By Matt Salisbury

Paul Krugman is a mouthy liberal pundit, but he has a beard and an economics degree, so we’ve collectively decided to call him an “economist.” He wrote a column in Friday’s New York Times in which he riffs on a recent Paul Ryan quote about a pillar of Catholic social teaching, the Dignity of Work. Ryan was speaking about the recent CBO report that the Affordable Care Act would eliminate a substantial number of jobs. The Congressman argued the plan would lead fewer “to get on the ladder of life, to begin working, getting the dignity of work, getting more opportunities, rising their incomes, joining the middle class.”

I’ve talked before about how I admire Ryan for his attempts to combine Catholic Social Teaching with his politics. Like just about every politician, the man has his flaws, but his application of our rich social teaching to his politics makes him really interesting. Setting aside (as Krugman did) the congressman’s other points, I want to focus on the “Dignity of Work” that he refers to.

The dignity of work comes from the dignity of the person. “In fact there is no doubt that human work has an ethical value of its own, which clearly and directly remains linked to the fact that the one who carries it out is a person” (Laborem Exercens, 6). It also has a valuable social dimension -- it is “with others and for others” as JPII wrote in Centesimus Annus. Stripping work of its human and social dimensions and reducing all value to that granted by the almighty dollar makes work a farce.

In his piece, Krugman wrote:

“It’s all very well to talk in the abstract about the dignity of work, but to suggest that workers can have equal dignity despite huge inequality in pay is just silly. In 2012, the top 40 hedge fund managers and traders were paid a combined $16.7 billion, equivalent to the wages of 400,000 ordinary workers. Given that kind of disparity, can anyone really believe in the equal dignity of work?

Well, yes, one can. By reducing work to simple financial gain, Krugman displays a surprisingly utilitarian (purely Capitalist?) view of workers. No, compensation for all workers is not equal. Yes, the dignity of good work done well is absolutely equal. This is because work’s dignity isn’t a manmade construct. It is not a number on a paycheck. If it were and Krugman were right, janitors and crossing guards and nuns would have far less dignity than liberal economists. And we know the opposite is almost always true.

This larger point -- that there’s a commonly accepted utilitarian worldview which reduces people to numbers and output -- is the bigger problem here. It’s at the root of errors on both the Right and the Left. No, the poor can’t always pull themselves up by the bootstraps and join The One Percent. Sometimes they really do need the state’s help. Yes, there is inherent dignity in work, and no, everyone shouldn’t be pursuing the same work. Absolutely, dramatic wealth inequality that keeps the poorest poor is an endemic problem.

But our dignity doesn’t come from our money. Only an economist would think it did.

 

Should ECONOMIC DISPARITY in the US be lessened? If so, by whom?


President Obama made American economic disparity a major theme of his 2014 State of the Union Address: “Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled.” There was oft-embraced reality in the president’s political jab. People seem to feel the American Dream’s maybe a bit wilted.

And the fears of dwindling class mobility extend beyond the Dems. Two years ago, the NYTimes quoted then-Presidential candidate Rick Santorum as saying, “[Movement] up into the middle income is actually greater, the mobility in Europe, than it is in America.” The National Review echoed that sentiment. The Times story also pointed out that American men raised in the bottom fifth income percentile were 42% likely to remain there as adults, compared with just 30% of British men or 25% of Danes in the same circumstances.

The American Dream tells us we can accomplish what we set our minds to, that we can raise ourselves up by our bootstraps, that the market rewards grit and pluck. The barriers to this fantasia are increasingly severe for those born into poverty.

Economic disparity, which we can look at more precisely through income inequality, raises a few important questions. The first is whether inequality itself, even severe inequality, is contrary to justice. Does the knowledge that others make far more than I do affront my dignity? Obviously, it shouldn’t, provided I earn enough to meet my needs, those of my family, and have a bit more.

This brings us to our second question. Where does income inequality become problematic? Catholic Social Teaching maintains that all men have the right to do work that provides for their family’s needs and security. Unemployment is a “social disaster” (Laborem Exercens, 18). Those at the very bottom of the American income spectrum are treated unjustly, not because their wages are unequal, but because they are so low as to be undignified. Entrenched economic disparity becomes problematic when it traps men in a dignity-less income band.

The core question: who is responsible for lessening the persistent cycle of low-income families?

The clearest answer might be companies themselves. The State, while responsible for protecting the poorest, is not responsible for creating jobs for each citizen. Rather, the State should “sustain business activities by creating conditions which will ensure job opportunities, by stimulating those activities where they are lacking” (Centesimus Annus, 48). The State’s emphasis on job creation shouldn’t be confused with an emphasis on the creation of profit, although jobs are often a result of increased capital.

The State can also do its part to decrease programs which keep the poorest in cyclic poverty. The Economist has an interesting piece looking at US social programs and how they’re structured: “In emphasising anti-poverty measures rather than social policies for all, America is more keen to raise the floor than to mind the gap.” Programs that fight poverty and focus exclusively on those with less, the piece argues, are generally less efficient than social programs (education, healthcare, etc) which include every citizen, rich and poor alike. 

Subsidiarity, the concept that decisions and change be effected at the most localized level possible, also demands that economic disparity be addressed at the level of individual companies. If companies create a path to economic movement for value-creating workers, they allow an equitable exchange while providing a path out of poverty. Again, the argument is not for making wages or economic incentive “more equal,” but for making it more just.

Finally, solidarity works both ways. The universal right to work is not the right to be given a job. Workers must apply themselves and ensure their exchange with employers is equitable. 

Although opportunity is probably best implemented at the individual business level, there is a legitimate concern around economic disparity at the national level since the U.S. stacks up relatively poorly against other high-income countries. 

The GINI Coefficient is an internationally-recognized indicator of economic inequality within nations. A GINI Coefficient of zero means complete income equivalence. A GINI Coefficient of one means a single individual owns all the income of a given nation with no distribution whatsoever. Nations with low GINI Coefficients (more income equality) tend to be in Europe and Scandinavia. Canada also has a low GINI Coefficient. The US has a very high GINI Coefficient; it’s at about 0.42 post-tax today and higher than that of most other wealthy nations. In real terms, the bottom 80% of Americans own just 7% of the nation’s wealth.

In addition to primary efforts by business and regional government, Subsidiarity among the community of nations would seem to point to the need for the national government to provide better leadership in lowering US economic disparity. This sort of leadership is best implemented, as mentioned earlier, by government support for a business-friendly environment coupled with robust and equitable social programs to encourage upward mobility out of poverty.

The United States is the wealthiest nation on earth, a reality that makes its economic disparity all the more troubling

It’s the Church’s focus on the value of private property ownership that drives its belief in “The Universal Destination of Goods.” Private property is necessary and ownership should be open to all, but “the right to private property is subordinated to the right to common use, to the fact that goods are meant for everyone” (Laborem Exercens 14).

So increasing private ownership alone, though necessary, shouldn’t be our ultimate goal. Unfettered capitalism isn’t itself a moral system. With that in mind, we’ve argued that action is most effective at the local business level. How might a business act to distribute the wealth it creates more equitably? Ideas include employee ownership/earned stock options, expanding employee mobility into management ranks, and increasing non-monetary benefit programs to help raise workers out of the sticky bottom bands of wealth.

 In a recent issue of INC magazine, Scott Leibs studied companies providing innovative employee benefits and tried to discover their bottom-line impact. He cites some interesting results from a 13,000-employee medical services company: “A few years ago, [Paul Spiegelman’s] companies began offering a new health benefit -- the opportunity to see a registered nurse within two hours, either at work or at home. There was an almost immediate payback: in just four months at Beryl, for example, 71 insurance claims were avoided and 246 work hours were saved (equating to an estimated $18,000 in wages) as employees got immediate care rather than having to visit a doctor.” The piece also quotes Spiegelman as saying, “Historically, companies have relied on their financials as leading indicators. But employee satisfaction, customer satisfaction, attrition rates, and similar metrics should serve as your leading indicators, with financials becoming your lagging indicators.

 

Economic Disparity’s clearest impact is on the poorest. Relative disparity within a wealthy nation that has a low GINI Coefficient is far less problematic than disparity in a nation which has the super-rich and the extremely poor. America has a serious obligation to its poor precisely because the nation is so wealthy.

I propose a set of steps moving forward.

That businesses create real employee mobility programs and clearly communicate how those programs work to entry-level employees. Reward work inputs with clear, transparent rewards.


• That businesses provide benefits and non-monetary compensation to improve the lives of employees and allow greater upward mobility.

• That the wealthiest in the US heed their responsibility to the poorest by charitable giving, not simply as an act of generosity, but as one of justice.

• That the U.S. national and state-level governments consider broad-based, comprehensive social programs rather than siloing the poor into programs exclusively for, and perpetuating, the poorest. That government also encourage business to provide real paths to upward mobility and earned improvements in living standards by employees through incentives for those providing quality, high-potential jobs.

Should we raise the MINIMUM WAGE?

Should we raise the US Federal Minimum Wage to $10?

The Federal Minimum Wage stands at $7.25 per hour, and has not changed since July 2009. As recently as 2007 the wage was $5.85 per hour. Now, just seven years later, labor advocates want to raise it to $10 or higher. How does the wage reflect human dignity?

On a general level, we know that man has the right to dignified work and a wage that allows him to provide for himself and his family, if he has one. It’s also worth noting that, “Beyond the rights which one acquires by one’s own work, there exist rights which do not correspond to any work performed, but which flow from one’s essential dignity as a person.” (Centesimus Annus #11). This seems to contradict the capitalist concept that the contractual agreement and economic output alone should determine the value of workers.

The popes, primarily in the encyclicals Quadragesimo Anno and Centesimus Annus, argue against utilitarian economic theories that try to assign worth to work based solely on “value added” models or market-based approaches that reduce workers to mere means to the end of work output.

That man requires a just wage is clear from any reading of the social encyclicals. It also seems fair to argue that the minimum -- the standard for those earning the least -- be set by the state:

“The more that individuals are defenseless within a given society, the more they require the care and concern of others, and in particular the intervention of governmental authority.” (Centesimus Annus #10)

The Catechism also teaches that “the state has a responsibility for its citizens’ well being” (CCC 2372). If there’s a legitimate argument that the state set a minimum wage, the next question is how much that wage should be. This is obviously a matter of prudential judgment, but certain facts can help determine a positive way forward.

The easiest application of solidarity would seem to come from how individuals are paid throughout organizations which employ minimum wage workers, and how many minimum wage workers the business model is structured to require. For instance, the demands of solidarity are arguably more pronounced for a business model like McDonald’s or Wal-Mart which depend on a host of minimum wage employees than they would be for a business model built around higher-paid employees.

Why is this? Businesses built on large numbers of very low-wage employees are often (though not always) contrary to justice, especially if they concentrate significant profits to the few at the top at the expense of the many below. In his foundational encyclical Rerum Novarum, Pope Leo XIII addresses the immorality of a such a system: “To gather one’s profit out of the need of another is condemned by all laws, human and divine” (Rerum Novarum #20). This should certainly provoke thought about application in specific circumstance -- there is a legitimate place for profit, and the employer is not responsible for eliminating all employee needs -- but the dependence of profit on low-wage employees is problematic.

Companies designed to depend inordinately on the working poor are passing on financial burdens to the larger community. For instance, those making minimum wage are more likely to avail themselves of taxpayer-funded social services. The hidden costs of operating these businesses are passed on to the public, who do not participate in the reward.


Another consideration of solidarity is how much is “enough” for a minimum. Men have the right to work and be compensated in a way that meets their needs, those of their dependents,
and have a bit more. Subsistence-level existence is not enough (Aquinas notes that no one is obliged to live “unbecomingly”). Keeping in mind that the minimum ought to be, in fact, a minimum, the state should consider rational application of that minimum. For instance, a full time employee making minimum wage brings home $15,080 per year, putting him just above the poverty line if single, and significantly below it if married with children.

The first element of subsidiarity regarding the minimum wage is what basic societal unit it pertains to. The Church argues that it be the family. Others, including conservatives who maintain that the minimum wage is “not meant” to support a family, think the societal unit is the individual. “The worker must be paid a wage sufficient to support him and his family” (Quadragesimo Anno #71).

Discrepancy between executive and entry level/wage earner pay fuels politicizations of this debate. While this discrepancy is a worthwhile consideration, a more accurate perspective might come from comparing minimum wages between nations and, within nations, between regions. Justice does not demand that we make income “more equal” across the spectrum, but that each person’s dignity and the right to express that dignity through meaningful and justly-compensated work be respected.

So how does the US minimum wage stack up against other nations?

Note that the blue lines represent “Purchase Power Parity,” or what your money actually buys as far as goods and services go. That helps the US stack up better, but it’s still behind most first world countries.

What about within regions? Living on the coast of California is vastly more expensive than living in the hinterlands of Arkansas. Many states address this discrepancy by adjusting their own state-level minimum wage, an interesting application of subsidiarity. The PPP between states would vary pretty dramatically, just as it does between nations in the graph above.

So US wage earners making Federal Minimum Wage generally take less purchasing power home than their economic contemporaries in other nations. Of course, this is merely wages for work performed, and doesn’t take into account (often considerable) social services nets.

“The amount of pay must be adjusted to the public economic good.” (Quadragesimo Anno #76).

Opponents of raising the Minimum Wage frequently cite concerns about higher minimum wages driving inflation. Is inflation a necessary follower of minimum wage increases? Economists disagree on what effect moderate increases to the minimum wage would drive. Some argue that it would stimulate the economy from “the bottom up”; others fear a domino effect a broad-based Federal minimum wage would have on other high-cost states and businesses paying a percentage above the minimum wage (the higher non-minimum wages are driven, the broader potential impact on inflation).

An interesting potential compromise is the elimination of a Federal Minimum Wage and the establishment of minimum wages on the State level. This would seem to address broader national inflation fears and be in line with the Catholic teaching of subsidiarity (which holds that concrete action should happen where it has the most immediate impact; local decisions should remain local).

Another question around The Common Good: are we served as a community by having a class of working poor? There should certainly be a range of incomes in society. Work should be adequately rewarded (an often-overlooked component of Catholic Social Teaching is its fierce defense of private property and individual ownership of land and resources). Society benefits from varying income levels and varying types of work. But income inequality has certainly demonstrated an ability to bleed into social strife, exacerbated crime rates, and increased political apathy, all of which damage The Common Good.

Additional considerations of The Common Good:

• What of those incentivized to stay on government safety nets/disability because working a minimum wage job would mean taking a standard of living hit?

• Is society well served by a dramatic disparity between rich and poor?

• Is The Common Good contributed to by business models that create false value behind products (ie “Fast Fashion” brands that dramatically discount clothing due to injustices throughout the production pipeline)?

The Preferential Option for the Poor is a key concern here, since those earning minimum wage are currently “the working poor.”

An often-used argument is that minimum wage jobs are not “meant” to be pursued full-time. This argument is made overtly, often by those on the political Right, or more covertly, as in the recent McDonalds employee budget resource that included income from an undefined second job. A second argument is that minimum wage jobs are not designed for adults with dependents, but for teens or those looking for extra cash.

I find fault with this classification because it excuses otherwise unjust compensation by inventing hypothetical second jobs or creating imaginary employee classes. Work should be fairly compensated: work by anyone, work with or without supplemental income. There are no alternate classes of human dignity. Nor is there an implied lack of dignity at the bottom of the economic ladder. In fact, the Preferential Option for the Poor tells us quite the opposite.

That being said, if the family replaced the individual as the central economic and social unit, progress could be made to better correct worker pay and minimum wage issues. This is a worldview shift for both ends of the American political spectrum that will be hard to legislate directly. It probably necessitates changes at the cultural, political and social levels.

Finally, The Preferential Option for the Poor does not tell us we must lift all the poor out of poverty. Christ told us we would have them with us always. This principle does mean we should consider the poor with special care when valuing the work they do.

I propose a set of steps moving forward.

• That any shift in minimum wage standards be informed and led by an honest and accurate understanding of the family as the fundamental societal and economic community.

• That the Federal Minimum Wage be eliminated and a state minimum wage be instituted in a manner compliant with subsidiarity. This should help slow national inflation while building a stronger tax base in wealthier states (where the minimum wage will be higher).

• That the average of U.S. higher minimum wages be brought into Purchase Power Parity with typical wages for other first world nations (and that wages between states not differ to extremes).

• That those businesses which depend inordinately on very low income employees be incentivized, both societally and by the state, to increase quality of life for employees and use operating funds judiciously in a manner compliant with The Preferential Option for the Poor and a respect for the inherent dignity of their employees.