ARTICLES

Is It A Fallacy?

Minimum Wage, the Catholic Bishops, and the Church's Social Teaching

BY BARTHOLOMEW JAMES

A bill in the state assembly to raise the minimum wage in California by one dollar an hour over a two-year period is steadily progressing through the legislative approval process and appears likely to reach the governor's desk. The bill has won the support of the state's Catholic bishops, while other Catholics dispute or defend a state-mandated minimum wage policy.

Introduced in January by Bay Area assembly members Sally Lieber (D-Mountain View) and Mark Leno (D-San Francisco), the bill, AB 1835, will raise the minimum wage from $6.75 to $7.75 per hour for millions of California workers, most of whom live at or below the federally designated poverty level. Supporters of the measure say that the increase will reduce the need for expenditures on public assistance programs, such as Medi-Cal and food stamps, potentially saving taxpayers over $2 billion in reduced program costs. In addition, the bill, known as the California Fair Minimum Wage Act, will annually adjust the minimum wage using the California Consumer Price Index in order to keep pace with inflation.

The bill is opposed by Governor Arnold Schwarzenegger, who has vetoed similar bills passed by the legislature over the past two years. Although he asserts he doesn't object to raising the minimum wage, the governor said he does have a problem with the indexing feature of the bill because it could hurt businesses, according to Deputy Press Secretary Darrel Ng. "Now that he works in state government, [Schwarzenegger] sees how automatic increases in things really handcuff government, and he doesn't want to handcuff small businesses by forcing them to increase the minimum a lot of times when they can least afford it. The argument there is that, when there's inflation, generally the economy is not doing as well, so you're forcing small businesses and other businesses to increase the minimum wage at a time when they can least afford it," Ng explained. But bill co-author Sally Lieber points out that salary increases for poverty-level workers are plowed right back into local businesses. "This money goes right back into the economy because minimum wage earning families can't afford to bank their money, they have too many unmet needs as it is," she said.

Schwarzenegger has asked the Industrial Welfare Commission to consider an increase of $1 over a nine-month period, without automatic increases tied to inflation. But Lieber questions the governor's intentions, since the commission has been all but shuttered for several years. "We're obviously going to continue with our bill and urge him to pursue the issue through the legislature and not try to make an end run around the legislature," she said. Ng concedes that the commission is currently inoperative because it hasn't been funded but claims that it still has the power to approve a minimum wage increase. "The commission still exists in statute, it still retains its responsibilities," he said.

Other opposition to the bill comes from the California Chamber of Commerce, which asserts that a minimum wage increase would provide a significant disincentive for employers to create new jobs and would increase the cost of doing business in the state by over $2 billion per year. Proponents of the bill counter that studies of minimum wage increases in other states disproves the job loss and increased business costs claims. A 2003 report by the Center for Urban Economic Development at the University of Chicago concluded that minimum wage increases in several states imposed minimal costs to businesses and resulted in a negligible impact on overall employment.

Bill supporters cite a recent study by the University of California, Berkeley's Institute of Industrial Relations, of San Francisco's two-year-old minimum wage law increase. In 2003, voters in the city approved a ballot measure that raised the hourly wage rate to $8.50 in 2004, with increases in future years tied to the regional consumer price index. Due to increases in the index, the hourly rate was raised to $8.82 in January. The Berkeley study found that the law did not affect employment growth in affected businesses -- mainly restaurants -- and did not spur business closures. In the restaurant business, the price of menu items was increased slightly, to about three cents on the dollar, to offset the increase in wages, according to the study.

The California Catholic Conference actively supports the minimum wage bill and considers the issue an aspect of Church social teaching on economic justice. "Catholic social teaching states that work has a special place, and work is more than just a job. It is a reflection of our human dignity and a way to contribute to the common good," said the conference's associate for governmental relations, Linda Wanner. "And most importantly it is an ordinary way for people to meet their needs and community obligations." Wanner rejects the assertion that the increase in pay may reduce jobs and impose an undue hardship on small businesses. "They use that argument all the time, and I really don't think that they have anything to back that up," she said. "Other states have raised the minimum wage, and they seem to be doing fine by it." The conference and other supporters of the bill point note that Alaska, Washington, and Oregon have all enacted similar measures and have yet to suffer economic devastation.

The United States Conference of Catholic Bishops has long supported minimum wage increases, including a pending federal bill that would raise the federally mandated rate to $7.25 an hour from the current $5.15. The U.S. bishops assert that raising the minimum wage nationally would not only help workers make ends meet but would advance economic recovery. In a statement last year, the bishops said the minimum wage "needs to be raised to help restore its purchasing power, not just for the goods and services one can buy but for the self-esteem and self-worth it affords the worker." The bishops reject the argument that an increase in wages will increase joblessness among entry-level workers. "History clearly shows that raising the minimum wage has not negatively impacted the economy. In the four years after the last minimum wage increase passed, the economy experienced its strongest growth in over three decades. Nearly 11 million jobs were added at a pace of 232,000 per month. There were ten million new service industry jobs, including more than one and a half million retail jobs, of which nearly 600,000 were restaurant jobs," they said.

Catholic author and Latin Mass Magazine associate editor Thomas Woods, however, is a contrarian on the issue. Woods is adamant that increasing the minimum wage will increase unemployment. "Almost all economists agree that increases in minimum wage increase unemployment," he said. Woods said it is basic economics that when the price of a product, including the price of labor, increases, demand will go down. "When something is priced higher than it might otherwise be priced, people will demand less of that thing," he said. Woods believes that in endorsing an economic policy, such as a minimum wage increase, the Church is overreaching. "Although they have laid down certain general principles that should be observed, the popes have generally allowed a fair amount of leeway among Catholics of good will to discuss how in practice these principles should be carried out," he said.

Woods subscribes to the mostly unregulated free market theory of economics and contends that government and ecclesiastical intervention into complex economic issues is counterproductive. "I do know that the mightiest engine ever in history for increasing the well being and the wages of the poor has been the competitive market. There's nothing that even comes close," he said. "If we care about people's welfare and the welfare of families, then we shouldn't want to impose policies that are going to disemploy heads of households, possibly, or they're going to disemploy anybody, and not just assume that because we can see some immediate gains for certain earmarked groups that that's the same thing as saying that there is an overall gain for society. That's a fallacy," he said.

But Thomas Storck, an author who has written widely on Catholic social teaching and is a contributing editor to New Oxford Review and the Chesterton Review, calls Woods misguided. Storck asserts that a long line of popes and papal encyclicals beginning in 1891 clearly support the idea that the Church can endorse government and other intervention in economic policies. For instance, in the encyclical Quadragesimo Anno, Pope Pius XI wrote, "but free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life -- a truth which the outcome of the application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated." In his encyclical Centesimus Annus, Pope John Paul II echoed his predecessor: "it is the task of the State to provide for the defense and preservation of common goods such as the natural and human environments, which cannot be safeguarded simply by market forces."

"The upholders of the free market like to say that 'this interferes with the law of the market,' and indeed it does," said Storck -- "because the Church has never embraced the law of the market. The free market can be useful within limits, but it can't be depended on to direct an economy. As a human activity, the economy cannot be divorced from man's final end, which is God. It is no more autonomous than any other human activity. The notion that the economy is some self-contained and self-regulating process smacks more of 18th century Deism than Catholicism."

Storck admits that the methods for obtaining a just wage for workers is open to debate. "A legislative mandate is certainly one way, and in some circumstances, it's probably the best. In our country, I would argue, it is probably the only way you can actually get it," he said. Storck said he doesn't deny the reality of market forces but that those forces are always influenced by other factors. "Which is why you need institutional safeguards, whether they be directly by the government or, better, by intermediate groups."

Storck particularly takes issue with Woods' assertion that the Church and the popes are exceeding their authority in social teaching by endorsing economic policies. "The free market approach to the economy has been decidedly rejected by the Church and nobody who is aware of the teaching of the church can endorse it," he said. "That's why Woods has to make these claims that the popes are exceeding their authority in their social teaching."

Further reading on the Storck-Woods debate is available online at the following links: www.chroniclesmagazine.org; www.lewrockwell.com

TOP