Just wages
JON TALTY REMEMBERS THE DAY ONE OF HIS EMPLOYEES asked him for a $700-a-year pay increase. Talty, president of a suburban Chicago architecture firm, had just relocated the firm's offices. The employee, an architect, complained he had to drive 20 extra miles to work. "He had computed that this would mean an additional 1,200 miles of driving over the course of a year," Talty recalls. "He felt he should be compensated for the additional wear and tear on his car."
Talty told the architect, "I'm sorry you have to drive the additional miles." By relocating, Talty explained, the firm was saving about 30 percent on rent. "I told him that money goes directly to the bottom line and that we were hoping, come the end of the year, to be able to distribute that much more to our employees."
Though the employee's request was a bit far-fetched, Talty says he often wrestles with the issue of fair compensation. When he took over Otis Associates in 1995, he raised the firm's salaries above competitors' to avoid turnover and gave all employees, not just partners, a shot at bonuses.
Talty is now part of a team called Business Executives for Economic Justice (BEEJ). The group meets once a month in Chicago to discuss how Catholic social teaching might apply to the marketplace. This year, BEEJ is examining a question that rests on a far back burner in most corporate boardrooms: What constitutes a just wage?
In the past, the 32-member group has produced guides such as "On The Firing Line," for Catholic managers forced to make cutbacks, and "Beyond The Balance Sheet," about juggling work and personal life. The group will issue a similar guide to the just wage later this year, focusing on such issues as wages and benefits, employee ownership, and gender equity.
Debate over exorbitant CEO pay (Michael Ovitz gets canned at Disney and walks away with an estimated $90 million severance package) sparked the discussion initially. "Then we began thinking, how much is enough to live on in today's world? What should we be paying our workers?" explains William J. Yacullo, co-owner of Lauer, Sbarbaro Associates, an executive recruiting firm in Chicago, and also a member of BEEJ.
The question became, "Do we make decisions purely on economic terms, or do we allow religious and moral principles to influence those decisions?" says Gregory F. Pierce, co-owner of ACTA Publications in Chicago. "How do you do that without losing your shirt?"
At a time when both wages and benefits are under siege, the BEEJ executives many of whom own or run companies would appear to be strikingly out of step with their corporate peers. But, says Pierce, for Catholic managers,"This is a matter of conscience. It goes to the heart of our values and religious beliefs."
It is also an undertaking worthy of mythical Sisyphus. How do you define a just wage? Is it the same as a living wage? What about a family wage? Researchers and theologians alike find it easier to define the opposite: What is too little?
"I can tell you I have met women working for the maquilas, the foreign corporations in Mexico, who are getting $4.50 a day. There is no way a person can survive on that, let alone a person with children. Prices are not that dissimilar on the other side of the border," says Father John Pawlikowski, O.S.M., a professor of social ethics at Catholic Theological Union in Chicago who is helping the BEEJ executives.
The U.S. government approaches the question in similar fashion, defining "too little" as living below the poverty line currently $16,050 a year for a family of four. Many would rightly call that subsistence, not a living wage.
Warring wages
What does it take to live comfortably in the U.S.? "We don't have any measurement of that sort," says Rebecca Blank, a Northwestern University economist. The problem is obvious: where to draw the line. Does every American need to own a house, two cars, CD player, and VCR?
The U.S. Department of Labor's Consumer Expenditure Survey provides one benchmark. It shows that in 1994 the average American household spent $31,751 on food, shelter, transportation, entertainment, and other expenses. This figure is highly general. It doesn't distinguish whether the family spent most of that money on such necessities as food and shelter or to buy a yacht.
William P.Daly, a human-resources consultant with the National Association of Church Personnel Administrators, has distilled the consumer expenditure figure to focus on the basic needs of food, shelter, clothing, transportation, and health care. He calculates that a family of three needs a minimum annual income of $22,206 to maintain" a decent standard of living." If you add in expenditures for vacation, entertainment, education, and contributions to retirement accounts, that figure jumps to $29,111 a year, Daly says.
As complex as the question may be, it has caught the attention of not just the BEEJ membership. Warns organizational expert David Korten, a sharp critic of the global economy: "[We are] moving toward a world in which every person and community is pitted against every other person and community in a life and death struggle for survival."
Adds management consultant and author James Autry, "We're headed for a lot of trouble. . . . Many layoffs are just shortsighted and stupid and without historical reference not to mention without concern for the people involved."
At no time since the rise of unions at the turn of the century have U.S. workers faced such pressures. Between 1980 and 1993, Fortune 500 firms shed 4.4 million jobs, even though their sales increased. During this same period, executive compensation increased sixfold.
By contrast, real incomes for the poorest 20 percent of families in the U.S. have fallen sharply, despite long spells of economic growth in the 1980s and 1990s. Declining wages offset the growth in jobs available to less skilled workers, notes Blank.
Layoffs used to plague only troubled companies. But in the 1980s, thriving corporations justified cutting staff, citing the need to compete in a global economy. Today, workers at highly profitable companies are scarcely secure. At a growing number of firms, executives get compensated in direct proportion to the number of livelihoods they snuff out.
Consider former Eastman Kodak chairman Kay R. Whitmore. In 1992, he cut 2,000 jobs though the company earned $1.14 billion that year. In 1993, company directors fired him: Whitmore had resisted investor demands to eliminate 20,000 jobs.
The discussion at a BEEJ meeting shows just how tricky the search for a just wage can be.
Joan Giardina, vice president of Chicago Trust Company, recalls at the meeting a recent radio report about people who love their jobs. "One was a woman who did lobbying for bicycling interests. She made $20,000 a year but said she didn't mind because she didn't have to buy the generic version of mustard at the supermarket. She could buy Grey Poupon. So things weren't so bad.
"The other was a woman who made $12,000 a year teaching and performing music," Giardina says. "Music was her compelling interest and she said couldn't possibly do anything else."
"Yes," Pierce interjects, "but we have to distinguish between those people and people on the bottom rung who make $12,000 and can't feed or clothe their families, who don't have insurance, don't have the money for recreation. I'm talking about the guy who makes $12,000 a year as a night custodian."
"What about the guy who makes $12,000 a year as a night custodian because he wants to volunteer during the day as a basketball coach? Maybe he has $100,000 in the bank from other sources. Is that okay?" asks Robert Bruce, vice president of ServiceMaster, a cleaning-services company.
"Maybe it's a question of choice," Pierce offers.
BEEJ executives have been scouring papal encyclicals and other church documents for guidance. They are discovering that the church has long upheld certain fundamental workers' rights but offers few specifics as to what constitutes a just wage. "In no way, in any of the papal encyclicals, will you find precise answers to what is a just wage," Pawlikowski says.
A century of wisdom
Still, the question has played a dominant role in the teachings of five popes,including John Paul II, who has returned to the theme repeatedly. Their writings, spanning 100 years, provide guidelines for just compensation, if not exact calculations.
At the turn of the century, Pope Leo XIII forced the question onto the worldstage in 1891 with his ground-breaking encyclical Rerumnovarum. In it, Leo addressed what he termed the "misery and wretchedness pressing so unjustly upon the majority of the working class."
True, the pope took up the cause only after social unrest in Europe threatened to overwhelm traditional institutions and undermine the church's moral authority. But Rerumnovarum (also known as "Capital and Labor") remains one of the most impassioned treatises ever written on the sacredness of work and the dignity of the working person. Pope John XXIII rightly called it the "Magna Carta of social reconstruction."
For the first time ever, Leo XIII tied the rights of workers to inherent human rights. He said workers should have a say in setting their wages. He called on the state to watch over their safety and limit the workday's length. He advocated funds to help the sick and injured. "Members of the working classes are citizens by nature and by the same rights as the rich," the pope wrote. "It is neither just nor human to grind men down with excessive labor or to stupefy their minds."
Even more revolutionary for his time, Leo upheld the workers' right to unionize. Though Leo aimed his teachings at an industrializing Europe, Rerumnovarum made its greatest impact in the U.S. after the turn of the century, where it became a rallying cry for Catholic blue-collar workers and established strong ties between Catholics and the union movement.
Leo didn't attempt to calculate a just wage. He simply decried the philosophy widespread then and today that the marketplace alone should set wage structures. Leo did, however, offer this guideline, at once poetic and rational: "The wage earner should be able to provide his family with all that is needful to keep themselves decently from want and misery amid the uncertainties of this mortal life."
Forty years after Leo, Pope Pius XI weighed in with Quadragesimoanno, "On the Reconstruction of the Social Order," an encyclical that advocates a minimum wage. By the time the document appeared in December 1930, the U.S. stock market had crashed, Americans were seeing the aftereffects of unbridled capitalism, and communism was spreading among American laborers.
In a statement as valid today as it was then, the pope declared, "The working poor has increased enormously and their groans cry to God from the earth. . . . The riches which are so abundantly produced in our age of industrialism . . . are not rightly distributed and equitably made available to the various classes of people."
Moving beyond his predecessor, Pius advocated profit sharing and giving workers a say in a company's management. Echoing Leo, he insisted that heads of families receive a wage large enough to meet "ordinary" family needs. But Pius also insisted, "If this cannot always be done under existing conditions, social justice demands that changes be introduced as soon as possible whereby such a wage will be assured."
Pius XI also identified a "family wage," one sufficient for a single wage earner to support a family. Reflecting his era, he couched this in terms of the patriarchal wage earner, asserting, "It is an intolerable abuse, and to be abolished at all cost, for mothers on account of the father's low wage to be forced to engage in gainful occupations outside the home to neglect of their . . . children."
Indeed, Pius' assertion became the American norm throughout the 1950s and1960s, until the vast and largely voluntary influx of women into the workforce in the latter part of the 1960s and early 1970s.
Popes JohnXXIII and Paul VI advanced the church's teachings on economic justice. Writing in Mater et Magistra ("Mother and Teacher") in 1961, Pope John called on governments to reign in business abuses and to press for full employment policies.
Paul VI repeatedly condemned "unbridled liberal capitalism." Long before the debates over the North American Fair Trade Agreement (NAFTA), Paul warned of the consequences of "entirely free trade," declaring that advances in knowledge and culture should spring from economic growth. He challenged richer nations to share "goods, wealth and expertise" with those poorer.
Like his predecessors, Pope John Paul II has left a detailed legacy involving the just wage. His Laboremexercens ("On HumanWork") appeared in 1981 on the cusp of the takeover and downsizing frenzy. Noting that work is "as old as man and his life on earth," John Paul reiterated "the priority of labor over capital" as a "constant principle of the church."
The staunchly anticommunist pope nonetheless chastised any system "guided chiefly by the criterion of maximum profit." In words that now seem prophetic given what we are witnessing in the global marketplace, here affirmed the role of the worker, "not as an instrument of production," but as a "maker or creator."
John Paul offers a detailed assessment of what constitutes just compensation, declaring that workers have "fundamental rights" to health-care insurance, suitable working conditions, and rest periods. The disabled, he says, should receive job training, and migrant workers should have special protections.
As for the family wage, John Paul adapted his teaching to address a woman's desire to pursue a career outside the home. Unlike Pius, whose concept of a family wage didn't include women entering the workplace, John Paul argues that wages should be sufficient so that women with children aren't forced to work." It should be possible for a mother to devote herself entirely to her children," he writes.
Working solutions
For the time being, the popes' writings are raising as many questions as they answer for the BEEJ executives. How do you reconcile the popes' repeated call for a family wage that allows women to stay at home if they desire with a government policy that forces poor women with children to get off welfare and get jobs? What do you do if you're the head of a company experiencing financial troubles? What about those who choose to earn less: the teacher who earns $20,000 in a Catholic school but could be making twice as much in the public schools? Are they getting a just wage?
Though the church's teachings might not fit neatly into real-world scenarios, many of the Chicago executives are still finding ways to apply them to their corners of the business world.
Robert Bruce is senior vice president of ServiceMaster in Downers Grove, Illinois, a company that employs thousands of workers at the low end of the wage scale, who clean hospital rooms, mop floors at schools, and empty the wastebaskets at hundreds of office buildings. In recent weeks, the Service Employees International Union has accused ServiceMaster of paying "poverty wages." It's a charge Bruce finds particularly wounding.
"Our only obligation is to pay the market wage and we pay that," Bruce says. "To pay below market, that would be unjust and unfair. I know you're not living a great lifestyle on $7 an hour. Yet, when we advertise for $7 or $7.50 an hour, people come in and apply for the jobs."
One alternative, Bruce says, would be to pay employees more than the going rate. "But if we do that we wouldn't get service contracts for our employees," he adds. "Our customers tell us, 'This is the most we're going to pay you.' It's something we struggle with all the time."
Bruce insists he has drawn some guidance from BEEJ's discussions, concluding that "there are obligations to your employees that go beyond economics, that are subjective."
Toward that end, he says he promotes programs at ServiceMaster that give workers access to training and better-paying jobs. "The group president of Terminix [the ServiceMaster division that makes pest-control products] started out spraying lawns 30 years ago.That's the kind of advancement we want to see."
In the short term, Bruce advocates a national study of wages. "Should market rates be higher? That's a legitimate question. If the government or some group wants to go through the appropriate analysis, I wouldn't fight it. I just know I'm not smart enough to do it."
Paul Fullmer, president of Selz/Seabolt Communications, a Chicago public-relations firm, didn't know of Pope Pius XI's call for employee ownership when, earlier this year, he engineered a plan to sell his firm to his employees. It simply seemed like the right thing to do, he says. "I didn't want some new owner coming in and laying off people. Besides, I've had the opportunity to have a nice life at this company. Why shouldn't it go to the people right here doing the work?" Fullmer says.
Fullmer sold his 93 percent ownership stake to the firm's 45 employees at a 25 percent discount to its estimated market value. Then he went one step further. The 63-year-old executive agreed to personally guarantee the bank loan employees would need to purchase his stock. That means that if the company suddenly went bankrupt, the employees wouldn't have to ante up the money: Fullmer would have to pay it back.
But even well-intentioned plans meet with the harsh reality of the marketplace, as Fullmer soon learned. Even though Fullmer's firm has doubled in size in the last seven years, reaching $4 million in revenue last year, many employees said they didn't want the risks of ownership, which would mean enduring the down times as well as sharing in the profits in good years.
"That shook the hell out of me," says Fullmer. "Here I was trying to take care of my people and the ini- tial response was 'Thanks, but no thanks.'" Eventually, the employees approved the purchase plan when Fullmer agreed to stay on as chairman for another five years, though he had hoped to retire at 65. "My wife's not too happy about this," he says, but "I felt it was my obligation as a steward."
A social contract
Richard Green is president of Blistex, the Chicago maker of lip- and skin-care products. Green says he sees the just-wage question as part of a broader issue: the social contract that exists between a company and its employees. "The more financially stable your employees are, the healthier they are, the happier they are, the better employees they're going to be. Is that Catholic, Christian, or just good business sense? I think it's a combination of those things," Green says.
Green says the company's chairman holds regular brown-bag lunches with employees where "anybody can bring up anything." The firm "encourages our people to take time off for things like parent-teacher conferences."
As a policy, Blistex won't lay off employees. "There have been occasions in the past where we kept people busy painting machinery and sweeping the floors because we didn't have enough production time for these workers," Green says. The company keeps its workforce at a minimum, preferring to hire temporaries in times of heavy workloads, rather than having to lay off a full-time worker in slow periods. Green says this strategy has helped Blistex remain profitable throughout its 50-year history.
As for salaries, the company's human-resources department keeps abreast of what other firms are offering to ensure Blistex's salaries are competitive, Green says. The company also has chosen not to transfer the manufacture of its products abroad to benefit from lower foreign wage structures.
However, Green maintains companies that do transfer jobs abroad to take advantage of lower labor costs aren't automatically out of sync with church teaching on the just wage. "Would I want to go to a country where people weren't treated fairly, where people work in sweat shop conditions? No," says Green. "But you can go to a country where people are compensated fairly based on the cost of living in that country. Maybe they're not getting what Americans would consider a fair wage, but it's better they get some income than none."
For Talty, the architectural firm president, the popes' teachings on the family wage poses the most complex questions. Talty says one of his managerscomplained that his wife had to work to support their family, while the wife of a colleague didn't. "My answer to that person was, 'Don't worry about what other people are doing. Do what you have to do to get to where you want to be.'"
Talty says he fears the church's teachings on the family wage suggest that people who are married with children should receive higher pay than a single person for doing the same job. "I think that's offensive,"says Talty, who is single. "That isn't fair."
Pawlikowski, the social ethics scholar, sees all of this as part of the dialogue that must take place in every generation on the just wage. "No document can tell you precisely what to do in the case of company X or Y," he says. "The just wage is something that has to continually be negotiated by sensitive people."