Acton Institute Powerblog

Are You Pro-Union or Pro-Minimum Wage?

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During CNN’s Democratic debate, presidential candidate, senator from Vermont, and self-proclaimed socialist Bernie Sanders promised that if elected he would work to “raise the [federal] minimum wage to $15 an hour.”

From an economic point of view, this policy would run the risk of sparking a wage/price spiral, where wages are tied to a cost-of-living index and their increase, in turn, raises the cost of living, sending inflation out of control and ultimately working against the intended goal of helping low-wage workers.

The Neo-Calvinist theologian Abraham Kuyper, however, offers a challenge not just to the economic consequences of such a policy but to its consistency, in principle, with another of Senator Sanders’ positions: his support for unions.

According to OpenSecrets.org, the vast majority (96%) of Sanders’ presidential campaign funds have come from individual donors, underscoring the senator’s strong grassroots support for his policies. However, all but one of his career top 20 contributors are labor unions. The Onion even joked that, during the debate, Sanders had to be “repeatedly scolded for trying to unionize [the] debate moderators.”

But so what? In our current political context, it is difficult to see these two as incompatible. Not so for Abraham Kuyper.

In his 1889 work “Manual Labor,” Kuyper argued for the right of workers to organize: “Organization, which we support … assumes that the realm of labor is a world of its own and best suited to determine its own interests,” he wrote.

According to Kuyper’s concept of sphere sovereignty, each area of life — whether science, art, business, religion, politics, or others — ought to have its own independence and be directly subject to the sovereignty of Jesus Christ, to whom “all authority has been given … in heaven and on earth” (Matthew 28:18). So too, he argued, labor ought to have its own sovereignty under the rule of Christ.

Furthermore, Kuyper also held an organic or personalistic vision of society, in which there are no mere isolated individuals but everyone is related to one another through interconnected social groups. For this reason, he believed that labor should not only be sovereign but that such sovereignty should reside in collective bodies as well as individuals. Thus, he believed, workers have a right to unionize.

Yet in the same work, Kuyper asks,

[D]o the authorities overstep their bounds when they create labor or reduce competition, raise wages or shorten the work-week, and in general support manual labor by making it available only under such conditions which ensure that the manual laborer is also respected as a human being?

His answer: “We believe it beyond doubt that the government does not have this right, at least not in an absolute sense.” Why not? “The government is not the only sovereign in the country.” In other words, because of sphere sovereignty. To Kuyper, the role of government, rather, is to uphold the right to organize and to enforce the contracts freely negotiated between employers and employees.

Thus, it is for the very same reason that Kuyper affirms the right of labor to organize that he opposes any law to “raise wages” by government fiat, even if such wages would be a matter of basic human dignity. The encroachment of the sphere of the state into a realm where it had no rightful sovereignty would be a greater evil to him.

While not everyone will agree with Kuyper, his reasoning poses a difficult question to modern day supporters of sphere sovereignty: Are you pro-union or pro-minimum wage? Do you support the right of workers to freely organize to negotiate wages they deem to be fair, or do you want the state to impose its own standard of fairness in violation of their freedom?

We might even sharpen this further and simply ask: Do you support sphere sovereignty or the minimum wage? To Kuyper, at least, you can’t have both.

Dylan Pahman Dylan Pahman is a research fellow at the Acton Institute, where he serves as managing editor of the Journal of Markets & Morality. He earned his MTS in Historical Theology from Calvin Theological Seminary. In addition to his work as an editor, Dylan has authored several peer-reviewed articles, conference papers, essays, and one book: Foundations of a Free & Virtuous Society (Acton Institute, 2017). He has also lectured on a wide variety of topics, including Orthodox Christian social thought, the history of Christian monastic enterprise, the Reformed statesman and theologian Abraham Kuyper, and academic publishing, among others.

Comments

  • WhoDunnit

    This logic seem to hinge on the theory that the cost of goods is ONLY driven by the cost of labor.

    An increased minimum wage, tagged to the rate of inflation, does not cause inflation.

    We are talking about a change in wealth distribution; not the introduction of new wealth.

    Modest price increases or executive pay cuts may occur in the short term, but productivity increases and increased buying power of lower wage workers results in larger sales totals, which should substantially improve the economy for our middle classes and aid the profitability of American businesses.

    • Dylan Pahman

      $15/hr is not based on the rate of inflation but a “living wage” based on the cost of living index. Thus, I mentioned the wage/price spiral (and linked to an explanation of it) because it happens when minimum wages are tagged to the cost of living index. Federal minimum wage is currently $7.25/hr, so a raise to $15 would nearly double labor costs to businesses for minimum wage workers and would be a 1.5x increase for workers making $10/hr. That would be a far bigger cost than you seem to think. There is no guarantee that executives could or would take that hit themselves. It is more likely, as economists such as Wilhelm Röpke pointed out, that the result will involve significant price increases among other bad things (such as increased unemployment or reduced hours).

      You are right that this would not mean the creation of new wealth, which is not the same thing as money. That would be a good thing, because then there would be greater demand for labor, which would increase wages. Because those increased wages would come from new wealth, companies could still make a profit without increasing prices.

      What would happen, however, is that raising the minimum wage that much would reduce the value of the dollar because one could not expect to be able to buy as much with it due to increased prices. That’s what inflation is. As a result of price increases, the cost of living would increase. Then people like Bernie Sanders would demand that we raise the minimum wage to the new “living wage” based upon the new cost of living, thus creating a vicious spiral. The more this is done, the worse inflation gets, and the low-wage worker is the one who loses the most.

    • The Scholars of Salamanca opposed minimum wages of any kind because they correctly understood that it would hurt the poor most of all through greater unemployment.

      It’s not owners or managers who determine wages, but customers. Customers have a fixed amount that they will pay something like fast food where most min wage earners work. Managers take that price and divide it among the inputs to producing the food. Profits are generally at their lowest possible rate due to competition and equal the cost of money (interest rates). Salaries determine the quality of management that owners can afford. Managers get the best they can afford in terms of goods and labor for the price that customers will pay. If you want to blame anyone for low pay for entry level workers, blame customers who don’t value that labor any more than they do.

      So as the Scholars of Salamanca understood, paying higher min wages would raise prices above what customers would pay and cause unemployment among the poorest people. We can see that today with the high unemployment rates among minorities and teenagers.

      The fact that Sanders wants a mere $15/hr min wage shows that he gets it. He knows that offering more would cause unemployment. But he is so extraordinarily arrogant and calloused to think that he knows $15/hr won’t cause enough unemployment to cause him political trouble.

      Economic evidence is clear and unambiguous about how to raise real wages: increase worker productivity. Any attempt to raise wages without increasing productivity leads to disaster.

      It’s silly to think that paying executives less or taking less in profits will keep companies from raising prices. That kind of thinking just proves how little people understand business. If you took every dime that managers make and gave it to employees they would hardly notice the pay increase in their checks. The same goes for profits. Most businesses earn a profit of around 5%. If you took all of the profit and gave it to employees they would see a wage increase of just 5%, or about 35 cents at the current min wage.