Do Businesses Owe Every Full-Time Employee a Living Wage?
By Matthew Dubois, Class of '20 | January 18, 2018
There is perennial debate on the topic of the living wage. This post tackles one of the argument's biggest ethical questions: Do businesses owe every full-time employee a living wage?
The Internal Revenue Service (IRS) defines a full-time employee as any employee who works at least 30 hours a week on average, or 130 hours a month. It would be unjust for an employer to compensate someone who fulfills those requirements with less than a living wage. Employees who qualify as full-time deserve to have time away from work for other commitments to pursue the good life. Businesses are obligated to pay full-time employees a living wage while supporting employees in their pursuit of the good life.
Aristotle taught that physical goods, a social life, and leisure are essential to living a good life. Full-time employees work to attain physical goods. Thus, work is a necessary component of any good life. Despite this, work cannot become the sole focus of one’s life. Time away from work is also important as it allows for leisure and a fulfilling social life. By compensating employees with a living wage, they will be able to achieve elements of the good life without being forced to take on more than one job. Time away from work granted by a living wage would create the potential for full-time employees to pursue the good life.
Proponents of the stockholder theory, such as Friedman, believe that a business manager should first place their fiduciary duty to the owners. Friedman would not think that a business owes its employees the good life if it comes as a cost to the business. A manager’s first responsibility is always the owner; thus, his or her responsibility is “to conduct the business in accordance with their desires, which generally will be to make as much money as possible” (Ciulla p. 250).
Friedman professes that the business does not owe employees a living wage if it would decrease profits. If a business paid every worker a living wage, then some workers would receive more than what a fair wage for their job may be. He asserts that it is the business’ duty to produce a positive economic effect that everyone can benefit from, and the most efficient way of doing so is to produce as much of a profit as possible.
Pope John Paul II and other supporters of stakeholder theory disagree with this view. The managers of a business should value their fiduciary duties to each stakeholder equally. In his encyclical, Laborem Exercens, Pope John Paul II described what he believed to be the purpose of a business. He wrote, “Capital should be at the service of labor and not labor at the service of capital.” The late Pope was a supporter of the family wage. Essentially, he believed that a business owed its employees a wage large enough for them to support their families adequately and ensure that neither the children of the worker nor the children’s mother would have to work.
Opponents to the family wage (such as Friedman) argue that a socially conscious business should focus on profits to benefit society, but do not acknowledge that employees deserve time away from work to pursue the good life. Proponents of stakeholder theory believe that employees are owed the opportunity to pursue the good life and businesses can fulfill that obligation by providing employees a living wage.
In conclusion, businesses owe a living wage to their full-time employees. A living wage provides the physical goods necessary for a good life while also granting employees time for leisure and social engagement. If the purpose of work is to provide workers with the physical goods necessary for the good life, does not the business’ responsibility extend to other components of the good life?
- Ciulla, Joanne B., et al. Honest Work: A Business Ethics Reader. Oxford University Press, 2014.
- John Paul II. “Rights of Workers.” Laborem Exercens (14 September 1981) | John Paul II.