Thanks for your posts in today's online class. Michael Naughton's A Theology of Fair Pay article provides a nice wrap for our compensation and benefits discussion. In this article Naughton acknowledges the importance of the market (contribution) in pay philosophy, consistent with our study earlier this week of market-based pay systems. The market imperative carries with it the implication that a company can afford to pay the market rate (economic order). Obviously, if a company cannot afford to pay the market rate it will soon go out of business for lack of qualified employees. Then he introduces a new wrinkle: need. Need is essentially what is often referred to as a "living wage". Where all three imperatives intersect -- contribution, economic order and need -- we find a just wage.
While the idea of a living wage might sound extravagant to some, John brings us back to reality in his post as he considers his own living circumstances compared to a living wage in different regions of Pennsylvania. The living wage is just that: what does it take to have a roof over one's head (a studio apartment for single people), food on the table, access to basic medical care, transportation (which doesn't always mean owning a car), and the like. See the components of a basic needs budget in Dr. Glasmeier's original poverty in America work here. A living wage provides the necessities, and that's about it.
Naughton's story about Reell Precision Manufacturing paints a picture of a real company dealing with real issues (no pun intended), doing their best to honor and place equal importance on each component of the just wage. As Brent pointed out, Reell moved the conversation from "ought" to "can", then demonstrated how. Matthew's post and Ricky's question to Paul highlight the challenge this places before business people... is it really possible to pay everybody a living wage in all companies and all industries in the United States. Julie and James discuss this question, comparing living wage to minimum wage, with Rob taking the question further asking about the application of a living wage on a global scale.
Naughton might argue that it is indeed possible to pay all workers a living and just wage if his three-part formula is properly applied. The need component will vary from region to region (as we see in the MIT Living Wage calculator), as will the market component. The challenge is for business owners and managers to design their organizations and work in ways that increase the value added to the company's products/services by each position thorough creative job design. As we saw in the Reell case, this also happens to make the job more meaningful, which takes us back to Van Duzer's second intrinsic purpose of business, creating meaningful work that allows people to use their God-given creativity.
Most of you agreed with the decisions and actions of the Reell Precision Manufacturing leadership team. As Paul and Brent point out in their posts, this was a complex business decisions that involved not simply raising everybody's pay over night, but a complete redesign of the production jobs and organization design to be more productive and efficient, increasing the value of the work performed, and thus enabling Reell to increase pay over a period of years to finally meet the local living wage.
Several of you also noted the challenge in selecting the appropriate target living wage. The MIT calculator provides a number of benchmarks based on family size. So which one does a manger choose? Karson, Eric, Scott and Rob all wrestled with this question. While there is no one right answer, perhaps demographic knowledge of your target market for employees can be helpful in determining your benchmark. It's also important to note that U.S. labor law requires equal pay for equal work; pay may not take into account variations between employee commitments outside the workplace. So paying one employee more because they have a family to support would put managers out of compliance with labor law, not to mention be inconsistent with the contribution component of Naughton's just wage model.
So, no easy answers here, but Naughton's model does help us to explore the implications of our faith on a central aspect of human resources management: what will we pay our employees. Clearly this is an issue that requires careful consideration when building a business plan. We started our compensation and benefits module noting that compensation philosophy flows from our business vision, mission and strategy, which includes Van Duzer's purposes. Baking just wages into a business plan from the beginning will help ensure we're building a a sustainable business model for both owners and employees.
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