The Just Wage

Long before there was an economy to study, there was the problem of the fair exchange. Aristotle set it down in the fifth book of the Ethics, where he divided justice in two: the justice that apportions a city’s common goods, and the justice that governs what passes between two hands. An exchange is just, he held, when it holds an equality — not a flat equality, for a house is not a shoe, but a proportionate one, each thing answering to the other according to its worth. Money was devised, he thought, precisely to make unlike things commensurable, so that the builder and the shoemaker might trade as equals.

From this came two convictions that would hold for two thousand years. The first was that a price could be set against a standard of justice, and found wanting. The second, its shadow, was that money which bred money — interest taken on a loan — was a thing against nature, since coin was made to measure exchange, not to grow.¹1Aristotle, Nicomachean Ethics V — justice in exchange, and the proportionate reciprocity that money exists to make possible. Usury as ‘contrary to nature’ — money breeding money — belongs to the Politics I. The fair exchange and the forbidden usury were the two poles of the moral economy, and the wage lived between them.

The Schoolmen of the Middle Ages took Aristotle’s equality and made it doctrine. Thomas Aquinas asked, plainly, whether a man may sell a thing for more than it is worth, and answered that he may not: to sell above the just price — the iustum pretium — is to take what is not freely given, and is against justice.²2Thomas Aquinas, Summa Theologiae II–II, q. 77, a. 1 — whether one may sell a thing for more than its worth; the just price as the common estimation, and the wrong of pricing to a buyer’s need. The wage was the same question turned around. A just wage was one that sustained the worker in the condition his labor and his station merited — enough to live, and to live as what he was.

But the doctrine held a quiet surprise, and everything turns on it. What was the just price? Not, for most of the Schoolmen, a figure handed down by a confessor. It was the communis aestimatio — the common estimation, the price a thing commonly fetched in that place at that time, among honest dealers. The just price was, in the ordinary case, the going price. What justice forbade was not the market but its abuses: the fraud, the cornering of a scarce good, the man who raised his price because he had seen that his buyer was desperate. Take those away, and the price the market reached was the price justice asked for.

It fell to the last of the Schoolmen to see how far that idea reached. In the universities of sixteenth-century Spain — at Salamanca above all — a remarkable company of theologians, Vitoria and de Soto, Azpilcueta and Molina, set out to work the just price through to its end, and arrived somewhere their successors would recognize better than their forebears could have.

The just price, they reasoned, could not come from the cost of making a thing, nor from the labor bound up in it, nor from any worth it carried in itself — for the same thing was justly dearer in a year of scarcity and justly cheaper in a year of plenty, though nothing within it had changed. It came instead from common estimation: from how badly the thing was wanted, and how little of it there was to be had. Price was the work of human need meeting human supply, and the just price was simply the price a free market reached when no one cheated and no one was cornered.³3The School of Salamanca — Vitoria, Domingo de Soto, Martín de Azpilcueta (Dr. Navarrus), Luis de Molina. That they reached a subjective, supply-and-demand account of value is the celebrated — and much-debated — thesis of Marjorie Grice-Hutchinson, The School of Salamanca (1952), later pressed by Hayek and Rothbard. They had, in the course of defending a medieval doctrine, very nearly arrived at the modern one — utility, scarcity, supply and demand — three centuries before the men who would be given the credit.

The just price, they concluded, was only the market price — honestly arrived at.

After Salamanca the moral price had little left to do. If the just price was the market price, then the market price could simply be called the price, and the adjective fell away. When Adam Smith came to write of a ‘natural price’ toward which the market gravitates, the machinery was the Schoolmen’s, but the justice had gone out of it; what remained was mechanism. For a century and more the question of whether a wage was just was not so much answered as retired — folded into the larger confidence that a free exchange, by being free, was already fair. The moral economy did not lose the argument. It was quietly informed that the argument was over.

It was not over. In 1891, into a Europe of factory towns and the first great combinations of labor, Leo XIII set down the encyclical Rerum Novarum, and with it returned the just wage to the world as a reproach to the market rather than a gloss upon it. Employer and worker, the Pope allowed, were free to agree on wages. But beneath that freedom lay something older and more binding: a dictate of nature, he wrote, more imperious and more ancient than any bargain between man and man — that a wage be enough to keep a frugal and upright worker alive.⁴4Leo XIII, Rerum Novarum (1891), § 45 — beneath the freedom to bargain lies ‘a dictate of natural justice more imperious and ancient than any bargain between man and man.’ If the free price fell below that line, the freedom did not make it just; it made the injustice consensual.

The idea, once restored, would not stay still. Pius XI widened it to the family wage — enough to keep not a man but a household. In America a priest-economist, John Ryan, turned the encyclical into a programme and a figure, argued the living wage as a legal right, and carried it close enough to power to take a nickname from the New Deal he helped to shape.⁵5Pius XI, Quadragesimo Anno (1931), on the family wage; John A. Ryan, A Living Wage (1906), who carried the argument into the New Deal and was known, in the end, as the ‘Right Reverend New Dealer.’ When the Fair Labor Standards Act set out, in 1938, to secure ‘the minimum standard of living necessary for health, efficiency, and general well-being,’ it was speaking the just wage in the flat prose of a statute.⁶6Fair Labor Standards Act of 1938, § 2(a) — the congressional finding against conditions below ‘the minimum standard of living necessary for health, efficiency, and general well-being of workers.’

Freedom did not make the wage just. It only made the injustice consensual.

So the oldest framework leaves two bequests, and they do not agree. From the just price as common estimation descends the whole market tradition — the conviction that a price freely reached is a fair one, that the wage is worth whatever it fetches, that to interfere is to deface a natural thing. From the just price as a moral floor descends its opposite — the conviction that a price can be unjust however freely it was struck, and that the law may say so. The defense of the market and the indictment of it were born in the same cloister, of the same parents, a few pages apart.

That is why the argument never closes, and why it is not, at bottom, an economic argument at all. Every contest over a minimum wage, every living-wage campaign, every claim that a market ‘clears’ and so settles the matter, is a late round of a dispute the Schoolmen were already having: whether the price the market reaches is the just price, or only a price. The wage was the first place the moral and the market met. It is still the place they have not finished meeting.