A Just Wage or Minimum Wage?

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, it is simply what is required to cover the essentials: 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. Amy 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. Many of you agreed with the decisions and actions of the Reell Precision Manufacturing leadership team. As Kyle N. highlights in his post, paying a just wage is a complex business decision. Katie, Andrew B., Dan & Malcolm note that Reell's key to success was 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. It is important to recognize that this kind of organization/job redesign this also happened 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.

So should a just wage replace the minimum wage? Ayanna, Andrew R., Anthony P., Dan, Joel, Kyle and Malcolm came down squarely as supporters of a just wage. Anthony B., Kyle and Malcolm went a step further, arguing that the living wage calculator was setting the bar too low.

If we were to move to a just wage, Ayanna asks an important question: which household size do we choose to set as the bar for a living wage? The MIT calculator provides a number of benchmarks based on household size. 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.

But many of you argued that requiring all employers to pay a just wage is not practical. Kayln reminds us of Naughton's economic order requirement: companies must be able to afford to pay a just wage. Not all business models are designed to support a just wage. Yet the minimum wage was recognized by many in this same group as being too low. Kaylyn and Kristen made a case for review and setting of minimum wage at the local and state-levels, rather than by the federal government. Junior offered a creative alternative: an age-based minimum wage, lower for those under 18 years of age, higher for adults.

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.