The Ethics of Wages

By Kyle Hubbard, Ph.D., Assistant Professor of Philosophy | January 6, 2017

Money

The minimum wage was one of the most common ballot questions posed to voters in the past election cycle. While the minimum wage votes were a bit lost amid all the attention paid to the presidential race as well as the marijuana ballot measures, four states approved measures raising their state minimum wages to at least $12/hr. by 2020 and one state (South Dakota) voted overwhelmingly against lowering the state minimum wage. In addition to the growing national campaign pushing for a $15/hr. minimum wage and the political discourse surrounding income inequality, it is clear that wages will be a prominent political topic going forward.

While these debates about the minimum wage play out in the political arena and involve the legal question about what wage governments (state or federal) should mandate, wages also have a significant ethical component. Regardless of the legal minimum wage, there is a more profound ethical question about wages that all employers (government, private, public, and non-profit) must wrestle with, i.e., 'what is the right amount to pay to our employees and how should we pay them'?

Too often, employers don't think about wages from an ethical perspective but merely from an economic one. The typical employer says something like, "we pay our employees what the market will bear." But in order for this answer to be ethical, further questions needs to be asked such as, 'Why should I pay an employee the going market rate'? 'Are there good ethical reasons for doing so'? The following reflections are an attempt to help employers begin to consider some of the ethical questions about wages. This is not a complete list and there are certainly many more questions for employers to consider.

1) Can my employees live on their wages?

Much of the impetus behind the campaign for a $15/hr. minimum wage is the idea of the living wage. $15/hr. is an attempt to approximate the wage that a person needs in order to have her basic needs met. While a $15/hr. minimum wage law would mandate such a wage, every employer should be asking, can my employees live on the wages we're paying them? This may not necessarily mean paying $15/hr. For example, if you employ teenagers for part-time summer jobs, there may be ethically legitimate reasons to pay less than what one would pay to a full-time adult raising a family. What factors should be considered in determining a living wage? Many factors need to be considered, from housing and food to the cost of transportation.

One helpful place to look for a rough approximation of a living wage is MIT's living wage calculator which breaks down the costs of living, and the corresponding living wage needed, for every county in the US. It is a good place to start when considering what a living wage should include. One important consideration about the living wage that tends to be overlooked in the legal minimum wage debate is that each organization's ethical obligations to their employees are different. A large corporation that banks a healthy profit most quarters may simply be able to pay their employees more than a small business startup. The living wage is an ideal that I would argue every employer should aim to pay. If it is not possible yet, set it as a significant priority/benchmark for the organization to achieve. If it is not a priority, then it is too easy to spend money in other areas of the organization.

2) How do we compensate our employees?

Another important consideration beyond how much to pay your employees is how you will pay them. Many business scandals have arisen from compensation structures that encourage shortcuts or outright corruption. For example, the Wells Fargo scandal is rooted in the company's compensation structure that almost required employees to illegally open up bank accounts without customer permission in order to meet their sales quotas. While some blame can go to individual choices, more of the blame must go to those who implemented a system that punished employees who did not meet their quotas. While the Wells Fargo case may be an extreme one, it is worth asking about your organization's compensation structure, are we tacitly promoting an unethical and unhealthy culture through the way we incentivize our employees? Is our internal culture so competitive that it all but requires our employees to cut corners or to not cooperate with their coworkers because they are in such fierce competition with them? Sure, competition can motivate people, but people are not just competitors. Most people are also motivated by an organizational culture