- If a person labors 40 hours a week to economically benefit another person or enterprise, how much compensation should he or she expect for their labor?
- What factors should be considered in determining whether compensation is fair?
- Does fair compensation benefit the community and the economy in general?
- If wage compensation by a profitable company is nevertheless insufficient to meet the workers basic needs, doesn't the resulting tax payer supported assistance really amount to a business subsidy supporting higher profits?
First, some background:
A living wage is the minimum hourly income necessary for a worker to meet basic needs. These needs may include shelter (housing) and other incidentals such as clothing and nutrition, health care, etc. In some nations such as the United Kingdom and Switzerland, this standard generally means that a person working forty hours a week, with no additional income, should be able to afford a specified quality or quantity of housing, food, utilities, transport, health care, and recreation.1
In 1891 Pope Leo XIII first described a living wage in terms that as could be generalized for application in nations throughout the world. He said, "Wealthy owners of the means of production and employers must never forget that both divine and human law forbid them to squeeze the poor and wretched for the sake of gain or to profit from the helplessness of others."2
Adam Smith was a supporter of living wages and viewed them as a way to achieve economic growth and equity. In his Wealth of Nations , Smith recognized that the rising real wages lead to the "improvement in the circumstances of the lower ranks of people" was an advantage to society. According to Smith, the government should align the interests of those pursuing profits with the interests of the labor force in order to grow the nation’s economy. Smith argued that high wages lead to higher productivity and overall growth.3
Introduction to the Living Wage Calculator