High wages, low wages, and morality

It's unusual for a controversial economic issue to be fought on moral grounds. But ACORN, a public advocacy group, has been winning a higher "living wage" for workers in state after state, city after city, by appealing to voters' sense of justice.

"It's probably the best [argument] we have," says Jen Kern, director of ACORN's Living Wage Resource Center. A decent income is a moral matter of "fairness," she says. Those who "play by the rules of the game should be able to support themselves by their work."

"A job should keep you out of poverty, not keep you poor," agrees Paul Sherry, coordinator of the Let Justice Roll Living Wage Campaign, a church-based coalition in Cleveland seeking to raise low wages.

According to the father of classical capitalism, Adam Smith, a Scottish professor of moral philosophy at Glasgow University in the 1700s, the "invisible hand" of self-interest ensures the most efficient use of resources in an economy, and public welfare is a byproduct.

Today Americans are mostly content to let market forces - that is, the law of supply and demand - determine the wage levels for the multiplicity of jobs, professions, and positions that make the economy work. It would be extremely difficult for a bureaucratic group to make detailed, comparative judgments as to the real value of various occupations and place a specific wage level on each.

But at some point, the extremes in wages resulting from what is called "free enterprise" begin to violate people's sense of common justice. They chuckle, then, at the portrayal in a Boston Globe cartoon of two bosses in a fancy office saying to three workers: "Why should you have a minimum wage? We don't have a maximum wage."

As it is, an employee working full-time at the federal minimum wage of $5.15 an hour makes $10,712 a year, about $1,000 above the official poverty level for an individual ($9,654).

At the other end of the scale, the compensation of top corporate executives, on average 431 times the salary of a blue-collar worker in his or her company, is widely seen as excessive. Critics often use the word "obscene" - a moral term - to characterize the tens of millions of dollars they get.

Capitalism in regard to pay is "out of whack," says Scott Klinger, codirector of Responsible Wealth, a Boston advocacy group concerned over deepening income inequality in the nation.

Mr. Klinger maintains that Adam Smith assumed equal power in a free market among its players. He didn't see the "enormous concentration" of economic and political power that has enabled the privileged to set the rules of the system. "Supply and demand is not the operative force," he says.

The Securities and Exchange Commission has just proposed that corporations disclose more information about executive compensation beyond salary, such as pensions and other perks.

"A small positive move," says Klinger. He advocates, among other things, that the directors of a firm should include not just executives from other companies, but also representatives of labor, the community, and others to better assure that business decisions take account of "stakeholders" other than company shareholders.

So far, though, rising income inequality has not aroused sufficient public indignation to prompt congressional moves to stem it.

Ms. Kern maintains it is "immoral" that so many Americans get up in the morning, work a full day, and then are paid so little they have to choose "between medicine, food, heat, or light."

ACORN campaigns with that theme have won such wide public support that 18 states and the District of Columbia have enacted higher minimum wage laws, from about $6.15 to $12 an hour.

But the federal minimum wage hasn't been raised in nine years. Action would directly help 7 percent of the workforce.

A think tank study released last week found that between the early 1980s and the early 2000s, the incomes of the country's highest-income families climbed substantially. Middle- and lower-income families, though, saw only modest increases in income and have begun to decline again despite relatively low unemployment. So today the income gap between the richest and poorest one-fifth of families is "significantly wider" than it was two decades ago, note the Center on Budget and Policy Priorities and the Economic Policy Institute, two nonprofit groups in Washington, D.C.

In past tough years, Congress has shared in economic suffering by cutting its own pay - in 1932 and 1783, for instance. Not so now. Since members of Congress last voted to boost the minimum wage, they have raised their own pay by 23 percent. Last October, the Senate voted 51 to 49 to hike the minimum wage, but it would have taken a supermajority of 60 votes to pass.

"I wonder what Adam Smith would have to say about that?" Klinger asks.

Soon Congress will consider making permanent a Republican tax measure that would fully repeal the federal estate tax - a tax that only hits a rich elite. This year, all estate assets worth less than $2 million per individual (and double that for a couple) are exempt from the estate tax. Only huge estates, one in 370 (0.27 percent), are subject to the tax.

Mr. Sherry of Let Justice Roll hopes that the "momentum" building at the state level for a legislated boost in the pay of the poor will carry over to the federal level. "People are seeing it more as an ethical, moral issue," he says.

Contrariwise, Kern sees "no hope for a federal minimum wage increase with this Congress and this administration."

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