Thoughts on "Fair Wages"

In 1918 John Ryan a Catholic priest at Catholic University in DC wrote a book entitled Distributive Justice (MacMillan, New York). I believe it is worth going back to some of the remarks of Ryan and try to understand some of the issues today in the context of a century ago. Let us begin with some of his definitions: 

Distributive justice is primarily a problem of incomes rather than of possessions. It is not immediately con­cerned with John Brown's railway stock, John White's house, or John Smith's automobile. It deals with the morality of such possessions only indirectly and under one aspect; that is, in so far as they have been acquired through income. Moreover, it deals only with those incomes that are derived from participation in the process of pro­duction. For example; it considers the laborer’s wages, but not the subsidies that he may receive through charity or friendship. Its province is not the distribution of all the goods of the country among all the people of the coun­try, but only the distribution of the products of industry among the classes that have taken part in the making of these products. 

These classes are four, designated as landowners, capi­talists, undertakers or business men, and laborers or wage earners. The individual member of each class is an agent of production, while the instrument or energy that he owns and contributes is a factor of production. Thus, the land­owner is an agent of production because he contributes to the productive process the factor known as land, and the capitalist is an agent of production because he contributes the factor known as capital; while the business man and the laborer are agents not only in the sense that they con­tribute factors to the process, but in the very special sense that their contributions involve the continuous expendi­ture of human energy. …

Moreover, there is the more fundamental ethical question concerning the titles of distribution: whether mere ownership of a factor of production gives a just claim upon the product, as in the case of the landowner and the capitalist; whether such a claim, assuming it to be valid, is as good as that of the laborer and the business man, who expend human energy m the productive process.Productive activity should be rewarded at different rates; in what proportion. Why should the capitalist receive six percent, rather than two percent, or sixteen percent? Why should the locomotive engineer receive more than the trackman? Why should not all persons be compensated equally? Should all or any of the benefits of industrial improvements go to the consumer? Such are typical questions in the study of distributive justice. They are sufficient to give some idea of the magnitude and difficulty of the problem. 

To Ryan then and to the Progressives now Distributive Justice is allocation by some mechanism other than the Free Market of profits, and land and wealth in general. He accepts that individual ownership is not acceptable as it stood at that time and one would suspect now as well. He continues: 

…that individuals are morally justified in becoming and remaining landowners. May we take a further step, and assert that private landownership is a natural right of the individual? If it is, the abolition of it by the State even with compensation to the owners, would be an act of injustice. The doctrine of natural rights is so prominent in the arguments of both the advocates and the opponents of private landownership that it deserves specific treat­ment Moreover, the claim that private landownership is a natural right rests upon precisely the same basis as the similar claim with regard to the individual ownership of capital; and the conclusions pertinent to the former will be especially applicable to the latter. A Natural right is a right derived from the nature of the individual, and existing for his welfare. Hence it differs from a civil right, which is derived from society or the State and is intended for a social or civil purpose. Such, for example, is the right to vote or the right to hold a public office. Since a natural right neither proceeds from Z is primarily designed for a civil end, it cannot be an­nulled and it may not be ignored, by the State, for example, the right to life and the right to liberty are so sacred to the individual, so necessary to his welfare, that the State cannot rightfully kill an innocent man, nor pun­ish him by a term in prison. 

Thus he does attribute a right to land and property. But he does so through a principle of a Civil rather than a natural right. This is a twisting of Thomistic Theory. Now he moves to a Fair Wage. He states: 

Although the principle of needs is somewhat promi­nent among the theories of wage justice, it received only incidental mention in the last chapter. Considered as a comprehensive rule, this principle has been defended with less energy and definiteness than most of the other canons. Considered as a partial rule, it is sound and fundamental, and therefore could not have been classed among theories that are unacceptable. 

The Principle of Needs: Many of the early French Socialists of the Utopian school advanced this formula of distribution: “From each according to his powers; to each according to his needs."…The difficulties confronting it are so great and so obvious that they would defer the introduction of it to a time when the operation of their system will, they hope, have eradicated the historical human qualities of laziness and selfishness. To adopt needs as the sole rule of distribution would mean, of course, that each person should be rewarded in proportion to his wants and desires, regardless of his efforts or of the amount that he had produced. The mere statement of the proposal is sufficient to refute it as regards the men and women of whom we have any knowledge. In addition to this objection, there is the insuperable difficulty of measur­ing fairly or accurately the relative needs of any group composed of men, women, and children. … Indeed, the standard of needs should be re­garded as a canon of Communism rather than of Social­ism; for it implies a large measure of common life as well as of common ownership, and paternalistic supervision of consumption as well as collectivist management of pro­duction. 

The Right to a Decent Livelihood: Every man who is willing to work has, therefore, an inborn right to sustenance from the earth on reasonable terms or conditions. This cannot mean that all persons have a right to equal amounts of sustenance or income; for we have seen on a preceding page that men's needs, the primary title to property, are not equal, and that other canons and factors of distribution have to be allowed some weight in determining the division of goods and opportunities. Nevertheless, there is a certain minimum of goods to which every worker is entitled by reason of his inherent right of access to the earth. He has a right to at least a decent livelihood. That is; he has a right to so much of the requisites of sustenance as will enable him to live in a manner worthy of a human being. The elements of a decent livelihood may be summarily described as: food, clothing, and housing sufficient in quantity and quality to maintain the worker in normal health, in elementary com­fort, and in an environment suitable to the protection of morality and religion; sufficient provision for the future to bring elementary contentment, and security against sickness, accident, and invalidity; and sufficient opportu­nities of recreation, social intercourse, education, and church-membership to conserve health and strength, and to render possible in some degree the exercise of the higher faculties.

These rights are thus not only to a salary but to all other things as he describes them. The list above is significant because it was presented in 1918 and not last week! He then goes on to describe what he calls the Principal Canons of Distributive Justice: 

Before taking up the question of the morality of profits, it will be helpful, if not necessary, to consider the chief rules of justice that have been or might be adopted in dis­tributing the product of industry among those who par­ticipate actively in the productive process. …The canons of distribution applicable to our pres­ent study are mainly six in number: arithmetical equality; proportional needs; efforts and sacrifices; comparative productivity; relative scarcity; and human welfare. (1) The Canon of Equality: According to the rule of arithmetical equality, all per­sons who contribute to the product should receive the same amount of remuneration. … It is unjust because it would treat unequals equally… (2) The Canon of Needs: The second conceivable rule is that of proportional needs. It would require each person to be rewarded in accordance with his capacity to use goods reasonably. If the task of distribution were entirely independent of the process of production, this rule would be ideal; for it would treat men as equal in those respects …Like the rule of arithmetical equality, the rule of pro­portional needs is not only incomplete ethically but impos­sible socially. …Moreover, any attempt to distribute rewards on this basis alone would be injurious to social welfare. It would lead to a great diminution in the productivity of the more honest, the more energetic, and the more efficient among the agents of production. (3) The Canon of Efforts and Sacrifice: The third canon of distribution that of efforts and sacri­fices, would be ideally just if we could ignore the questions of needs and productivity. But we cannot think it just to reward equally two men who have expended the same quantity of painful exertion, but who differ in their needs and in their capacities of self-development. To do so would be to treat them unequally in the matter of welfare, … (4) The Canon of Productivity: According to this rule, men should be rewarded in pro­portion to their contributions to the product. It is open to the obvious objection that it ignores the moral claims of needs and efforts. … When men of equal productive power are performing the same kind of labour, superior amounts of product do represent superior amounts of effort; when the tasks differ in irksomeness or disagreeableness, the larger product may be brought into being with a smaller expenditure of painful exertion. If men are unequal in productive power their products are obviously not in proportion to their efforts. … (5)The Canon of Scarcity: It frequently happens that men attribute their larger re­wards to larger productivity, when the true determining element is scarcity. The immediate reason why the engine driver receives more than the track repairer, the general manager more than the section foreman, the floorwalker more than the salesgirl, lies in the fact that the former kinds of labour are not so plentiful as the latter. …As between two men performing different tasks, superior skill receives su­perior compensation simply because it can command the greater compensation; and it is able to do this because it is scarce. …(6) The Canon of Human Welfare: We say "human" welfare rather than "social" wel­fare, in order to make clear the fact that this canon con­siders the well-being of men not only as a social group, but also as individuals. It includes and summarizes all that is ethically and socially feasible in the five canons already reviewed. It takes account of equality, inasmuch as it regards all men as persons, as subjects of rights; and of needs, inasmuch as it awards to all the necessary partici­pants in the industrial system at least that amount of re­muneration which will meet the elementary demands of decent living and self-development. … Owing to the excep­tional hazards and sacrifices of their occupation, a com­bination of producers might be justified in exacting larger compensation than would be accorded them …

Ryan leaves the reader somewhat with the old adage, “on the one hand, on the other hand”. He does however demand a living wage, yet it is left undefined, only that it must cover all the factors he outlined. Finally with regard to Profits Ryan states: 

The Question of Indefinitely Large Profits: As a general rule, business men who face conditions of active competition have a right to all the profits that they can get, so long as they use fair business methods. This means not merely fair and honest conduct toward competi­tors, and buyers and sellers, but also just and humane treatment of labour in all the conditions of employment, especially in the matter of wages. When these conditions are fulfilled, the freedom to take indefinitely large profits is justified by the canon of human welfare. The great majority of business men in competitive industries do not receive incomes in excess of their reasonable needs. Their profits do not notably exceed the salaries that they could command as hired managers, and generally are not more than sufficient to reimburse them for the cost of education and business training, and to enable them to live in reason­able conformity with the standard of living to which they have become accustomed. Efforts and sacrifices are reflected to some extent in the different amounts of profits received by different business men. When all due allowance is made for chance, pro­ductivity, and scarcity, a considerable proportion of profits is attributable to harder labour, greater risk and worry, and larger sacrifices. Like the principle of needs, that of efforts and sacrifices is a partial justification of the busi­ness man's remuneration. Those profits which cannot be justified by either of the titles just mentioned, are ethically warranted by the prin­ciples of productivity and scarcity. This is particularly true of those exceptionally large profits which can be traced specifically to that unusual ability which is exempli­fied in the invention and adoption of new methods and processes in progressive industries. The receivers of these large rewards have produced them in competition with less efficient business men.

The question as to the above is who makes all these decisions? Government? Well a century later we see what has transpired. But let us read Timothy 5(16) 

If any of the faithful have widows, let him minister to them, and let not the church be charged: that there may be sufficient for them that are widows indeed.

This is Paul stating the Individual responsibility, not the Church or the State. One wonders how this conflict is resolved.

Dream Merchants

A good entrepreneur is also a good "Dream Merchant". Not a Huckster, not some creature from Hollywood's distortion of reality, but a person who has a dream, has embodied it in some form, and sees where it can go where others cannot yet see it.

I will give an example. In 1980 I went to Warner Cable. The Chairman at the time wanted me to develop a business using video on demand and extend it well beyond home shopping and banking. I took that dream and embodied it in reality and then brought in companies like Bell Atlantic, Bank of America, GTE and DEC. Each did their due diligence and the like. The problem with many dreams is exogenous factors often interfere, Warner rand upon hard times with Atari, and also we were a bit too early, say thirty years too early. But the Dream had legs, it was an Amazon before perhaps many today at Amazon could read. But that is at best a foot note to history.

At the other end there were executives at our partner, who would say that this home shopping would never work. They went on to head major banks and computer companies. They were right in the short run but well off the mark of the march of history. Yet in business timing is everything. Dream Merchants are only as good as the timeliness of their dream.

Now to a piece in the New Yorker. It says:

The greatest business icon of our era, Steve Jobs, was legendary for his “reality-distortion field,” which allowed him to convince people that improbable outcomes were not just possible but certain. Jobs’s endless rehearsals for his public presentations and his scripting of every moment for maximum effect—these are all straight from the con artist’s playbook. So, too, is the sense of conviction he projected. In Weinberg’s words, “Before you sell a deal you have to live the deal. You have to believe in it, because, if you don’t believe in it, you can’t sell it.”Of course, the fundamental difference between entrepreneurs and con artists is that con artists ultimately know that the fantasies they’re selling are lies. Steve Jobs, often enough, could make those fantasies come true. Still, that unquantifiable mélange of risk, hope, and hype provides both the capitalist’s formula for transforming the world and the con artist’s stratagem for turning your money into his money. Maybe there’s a reason we talk about the American Dream.

I knew Jobs at a distance from my Atari days. At Atari they saw Apple as the competition, and even had Apple decals lining the urinals, some Silicon Valley humor I guess. But Jobs was a Dream Merchant, but one who always believed that he could achieve the dreams. He was not a con man, for the most part almost all entrepreneurs are Dream Merchants and not con men. The article's nexus is not only unfair but a distortion of reality. I have seen con men, they stand out like sore thumbs. I have seen them in Russia, Poland, Korea, New York and yes California. They have no substance behind their pitches. Jobs had reality.

Dreams and Dream Merchants as entrepreneurs are essential to our culture. They "burn their boats" and set out forward towards their dream. Without them we would have a very different world. Jobs had to have certainty, after all he is setting out on a journey from which there is only one goal, success, achievement of what he predicted. Then again, like Warner, he may have a great product but at the wrong time, look at Lisa. Yet in the long run he set a standard that few can beat.

The author in my opinion totally misunderstand the entrepreneur. The entrepreneur is no con man, the entrepreneur is what makes America. We have con men everywhere. We need to honor and cherish and nurture our entrepreneurs, not defame them out of ignorance.

Health Care and Logic

I am always amazed at the gaps in logic from the defenders of the ACA. Let us take as an example one MIT Professor who states:

"I am totally biased", xxx quipped about his advocacy of the Massachusetts program. “Nonetheless, if you look at the facts, I think it’s been, by the objective facts, a success.” He noted that about two-thirds of formerly uninsured residents are now covered, while premiums for individual insurance have dropped by about 50 percent.

First, yes he is biased. That in itself is not what an academic should be. One should seek the facts. It is like having dedicated dyed in the wool Marxists teaching in the Economics Departments. One would hardly expect a fair hearing. I believe he is speaking of Massachusetts. Yet the new insured are often under Medicaid and as such have very limited access to physicians. He continues:

xxx also emphasized that states’ adoption of Medicaid expansion is an important facet of the plan to monitor. The Affordable Care Act offers full federal funding of Medicaid (an expense that is normally split 50-50 between the federal government and the states) for three years, an amount that declines to about 90 percent thereafter. Yet governors in 26 states have declined to accept the funding, a stance made possible by a 2012 Supreme Court ruling — and one xxx labeled as “political malpractice.”

“There is no citizen in a state like Florida that is worse off if they expand Medicaid,” xxx suggested. “None. All of the [uninsured] get health insurance. Everyone else gets enormous federal stimulus injected into their economy.” He added: “That’s another thing to keep an eye on: How long are states going to hold out?” 

Now the logic fails as follows. If they expand Medicaid in Florida, or any state, the costs must be picked up somewhere. That means increased taxes or fees. That means that those who do not get Medicaid will see increased Government confiscation and thus an imputed harm. One then assumes that they are thus not better off but worse off.

In fact, as Medicaid is expanded, it is essentially "free" to the new subscribers but "paid" for by the limited Middle Class which is further squeezed. I have argued this for over fiver years now since the current Administration started this process.

More on Employment

It is worth looking a bit deeper into the employment numbers.

Look at the three services oriented businesses above. There has been a consistent growth in professional, and slower growth in financial.

Then if we look at 2005 and December 2013 we see the changes above. Mining has increased but it is small. Manufacturing is down almost 20% in both sectors. This is a major concern. Construction is down almost 25%. Even Government is down. However Ed and Health is up almost 20%.

The above is the Government and related sectors as compared to the core non Government sectors. We see the ratio has increased but is still quite higher than 2005.

The above is the core worker numbers. The Manufacturing are down but with a slight recovery. Construction is also flat.

We present a similar set of stats below but on a per PoP basis.

Finally we show the percent by sector in mid 2005 and December 2013. Leisure, Ed & Health and Professional have increased as a percent. Almost everything else has decreased

Overall this does not bode well for any recovery increasing in 2014.

Employment: Not Good News

Whenever you can change the denominator you can make up whatever number you want. Thus goes the employment numbers. The economy demands just by growth of people alone well over 100,000 new hires net per month. We got 75,000 and the unemployment rate goes down. Only in Economics can you have totally counter factual numbers.

First the population percent employed. In June 2006 we had over 45.5% Now we are at 43%. That means that the gap are permanently unemployed, not generating GDP and not producing taxes, and worse requiring unemployment payments and other benefits.

This shows the population increase and the non farm seasonally adjusted employment. Yes it is increasing, except for a drop last month. The gap is closing, which may be some good news.

But when you look above at the workforce percent it has dropped again this month which accounts for most of the decrease in unemployment! In fact the unemployed has gone up if we consider the 2006 numbers.

The above details some of these numbers. Bottom line, we are still getting worse, despite the Government's saying otherwise.

You Can't Make This Up!

To anyone familiar with the alleged "English Constitution" one knows that it cannot be found anywhere, it just exists. Furthermore, at its core, is the division of England into three parts; the Crown, the Aristocracy, and the Common Folk.

Now in line with that the Guardian announces that the hairdresser of the PM has gotten an MBE from the Crown for his service in hairdressing. Really! They state:

David Cameron's barber was awarded an MBE in the New Year honours list for "services to hairdressing", it has emerged.

This is England, awards, honors, class etc. It reminds me of Admiral King during WW II who hated the British Navy for being a bunch of snobs. King thus demanded that wearing one's medals on a regular uniform was prohibited. All one needed was rank. Keep the chest clear. British officers were burdened down with their medals, many "awarded" for the least of things. Unfortunately we see today that US General officers come to Congress with shelves of ribbons, many for just having shown up. King would not be happy.

King would never have imagine how far the Brits would go however. Yet we do have our Hollywood awards, self promotion for a segment of society which contributes not a not to productivity, and in fact, often send the worst of message of our society to others.