Just Wages and Salaries

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JUST WAGES AND SALARIES

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The ethics of just compensation are informed by the continual effort to balance three powerful principles; several other considerations contest and limit the reach of these ethical principles.

Overview of Ethical Dimension of Just Compensation

The first ethical principle is that every working person possesses an inherent dignity and deserves respect. All workers, no matter how high or low their skills or compensation, are important and valued members of the institution. In fact, ethically, each person, no matter what job they perform, is entitled to the same amount of respect as any other worker.

The second ethical principle is that each working person has the right to be able to support themselves and their families by the fruits of their work. Few argue with the proposal that people who work full-time should earn enough to support themselves and their families. That means people who work full-time should earn at least a living wage. How much constitutes a living wage is open to discussion, but most people of goodwill agree that part of being a good employer involves paying workers a living wage. While an employer has many obligations and paying fair wages is not their only duty, it is certainly one of the most important.

The third ethical principle is that economic considerations and the health of the employer are also important. Without an economically healthy employer, opportunities for jobs paying living wages are limited. Wages are an important part of the overall budget of all healthcare providers and must be set with the economic health of the institution in mind. If an employer is in a precarious financial situation, then the obligation to pay a living wage must be adjusted accordingly. Ethically, however, the employer is obligated to pay living wages to workers before spending money on other, less important matters. For example, corporations have a duty to produce returns for shareholders. But the corporate duty of employers to shareholders is not as compelling ethically as the duty to pay living wages to employees. Healthcare institutions often present themselves as, and are expected by the public to be, community resources. As community resources, healthcare employers are viewed differently than, for example, the local food and beverage industry or other retail businesses. This creates different and legitimately higher justice expectations for the healthcare employer. Unlike other corporations, healthcare institutions are expected to operate with a commitment to the common good and not just for private gain.

Several countervailing arguments are used to attempt to limit these ethical considerations in determining just compensation. The first and most pervasive argument is that economic market forces alone set ranges of compensation. To many, these market forces are apart from and unaffected by ethical principles. From this perspective, the ethical duty of employers to pay each and every worker at least a living wage is a discussion that philosophers may engage in, but is not realistic enough to engage business decision-makers.

A second argument, which arises out of the first, is that the labor of some people is inherently worth more than the labor of others. In this perspective, considerations of productivity, educational achievement, difficulty of replacement, and competition from other institutions are the real standards for determining compensation. Considerations of human dignity and the right to a living wage are at best peripheral. The determination of what is just compensation is analyzed, evaluated, and decided in the continual contest between these considerations.

Just Compensation

Justice demands that all compensation decisions start with the recognition that each worker has a fundamental human dignity and worth that is equal to every other worker. People work to support themselves and their family members. Thus, at a minimum, each worker must earn enough to support themselves and their family as a result of their labor. Justice does not demand, however, that all persons earn the same amount.

Compensation decisions involving individuals engaged in the same type of occupation are often based on considerations of ability to perform the task assigned, demonstrated and consistent effort, overall quality of work performed, and special skills, ability, or training that allow the person to perform tasks that coworkers do not or cannot. Compensation decisions involving allocation of funds between different categories of workers are often based on principles of productivity, scarcity, comparative effort, and market forces.

Justice demands that the basic needs of all workers be respected as a first principle, and that the decisions about how to apportion the surplus be made in a manner which is fair in both process and result. Fair process for determining compensation in a healthcare institution means that the needs of all workers, the needs of the recipients of healthcare, and the economic needs of the institution are given fair opportunity to be heard and balanced in decision making. To be fair, the process of determining just compensation must be transparent, inclusive, responsible, and participatory. The ability of workers to bargain collectively if they choose to do so must be protected and respected. Fair results in determining compensation are difficult to define, because there are so many competing needs. At a minimum, fair results require decisions that are rational, explainable, and non-discriminatory. Even when fair results are achieved, rapidly changing circumstances can undermine the appropriateness of prior decisions.

Lowest-Paid Workers

A critically important part of the ethical evaluation of any institution is how it compensates its lowest-paid workers. This is the point where the contest between living wages and market forces is played out.

Living wages are the ethical goal of all responsible employers, but as noted above, there are considerations opposed to living wages for the lowest-paid worker. The need to keep overall lower-skilled labor costs down is a constant concern of management. Part of the determination of what is fair compensation is the answer to the question of "what is everyone else, at least those in the surrounding community, paying for similar work?" Employers who pay less than prevailing wages will find it hard to attract and retain a full complement of good workers. Employers who pay a living wage when others pay less will be faced with internal and institutional criticism that there is an overpayment of wages that may harm the financial health of the institution. And, in some lower-wage communities, healthcare institutions need not pay a living wage to attract and retain entry level or lower-skilled employees.

What is a living wage? While there are many definitions of what constitutes a living wage, all involve the worker earning enough to be able to be self-sufficient and to have enough income to support their family. While the precise amount needed to be self-supporting varies by locale, it is always significantly higher than the federal minimum wage. Some living wage laws have calculated the amount of living wages as the amount necessary for a full-time worker to lift a family of four over the federal poverty guidelines, roughly twice the federal minimum wage. The living wage is sometimes even called the family wage.

Highest-Paid Workers

While ethics indicates that all persons are entitled to be treated with human dignity and respect, there is also general agreement that just compensation does not mean that all people must earn the same amount. Once the basic needs of all workers have been met, justice recognizes that more educated and skilled workers have first claim to higher compensation out of the surplus that remains. This recognizes that higher pay is a partial motivation for people to continue education and to defer other work opportunities while learning higher skills.

Higher compensation is particularly called for in healthcare, where many of the higher-skilled workers have developed their expertise by accumulating substantial educational debt and where the risks associated with their practice require significantly higher insurance costs. People who invest more in their education, who continually improve their skills, who sacrifice more, who are more difficult to attract to provide needed work, and who risk more to provide needed services to others, are ethically deserving of extra compensation.

Compensation for higher-skilled workers should be calculated after consideration of many factors: the overall economic health of the institution, the provision of quality care to those who seek healthcare, and the needs of the lower-paid workers to receive living wages.

There is an ethical caution in the actual calculation of compensation for higher-paid workers: the duty to provide fair and adequate compensation for low-wage workers is ethically more important than the goal of providing competitive compensation for the highest-paid workers. Where there is a conflict within an institution between providing more attractive compensation for higher-wage workers versus paying a living wage to lower-wage workers, the needs of the lower-wage workers ethically trumps the wants of the higher-salaried workers.

Pay Equity Considerations

Equity issues in determining just compensation are aimed at eliminating the effects of gender-, race-, age-, and disabilitybased wage discrimination. While these types of wage discrimination are now illegal, the effects of discrimination remain. For example, a quick look at most institutions will show that occupations dominated by women and people of color usually pay less than others within the same institution. Gains have been made toward removing the barriers of intentional discrimination. Most people of goodwill agree that intentional acts of discrimination are wrong and should be immediately corrected. But discrimination is not confined to overt acts of prejudice on the part of individuals. Discrimination continues in many institutions as the structural effects of past practices continue to have a negative impact. Differences in education, experience, and time in the workforce form a part of the legitimate criteria for determining compensation. However, concerns for pay equity require the institution to continually question and readjust the institutional respect for the value of work performed by lower-paid workers. Action should be taken to upgrade lower-paying jobs and to correct unjust wage discrimination based on gender, race, age, and disability.

Another equity issue is the large income gap between the highest-paid workers and the lowest-paid workers found in many institutions. Economic inequality within an institution often reflects an uneven participation in the decisionmaking process within the institution. Further, income disparity within institutions usually becomes a heightened source of concern in times of economic trouble and transition. While some accept this disparity as inevitable, it is not. Like all economic decisions, wage and salary scales are set by people in an ethical, legal, economic, and community context.

Role of Government

The government has an obligation to provide the legal and economic framework necessary for employers and workers to engage in fair and just compensation relationships. Government has a duty to help citizens secure basic justice and to protect the civil and human rights of those without the power to secure those rights for themselves.

The government exists to protect the common good. Just compensation of all members of the community is certainly in the common good. Government must protect the rights of the employer and all workers to fair and just determinations of compensation. Where there are unequal power relationships between workers and employers, the government should participate in leveling the playing field. Government has a role in securing fair labor practices that lead to just compensation.

If the government assists the common good, it acts justly; when individuals or institutions prompt the government to assist the common good, they act justly. When the actions of government are contrary to the common good, they are unethical and unjust; when private individuals or institutions attempt to prevent government from regulating for the common good, their actions are unjust. The government has an important role to promote fairness and equity in the continual process of securing just compensation, particularly for lower-paid workers and those who have been the victims of pay inequity.

william quigley

SEE ALSO: Healthcare Management Ethics; Justice; Labor Unions in Healthcare; Organizational Ethics in Healthcare

BIBLIOGRAPHY

Adler, Mortimer J. 1992. The Great Ideas: A Lexicon of Western Thought. New York: Scribner.

Galbraith, John K. 1998. Created Unequal: The Crisis in American Pay. New York: The Free Press.

Hart, Vivien. 1994. Bound by Our Constitution: Women, Workers and the Minimum Wage. Princeton, NJ: Princeton University Press.

National Conference of Catholic Bishops. Economic Justice for All: Pastoral Letter on Catholic Social Teaching and the U.S. Economy. 1986. Washington, D.C.: Author.

Pollin, Robert, and Luce, Stephanie. 1998. The Living Wage: Building a Fair Economy. New York: The New Press.

Quigley, William. 2003. Ending Poverty as We Know It: Guaranteeing a Right to a Job at a Living Wage. Philadelphia: Temple University Press.

Rawls, John. 1999. A Theory of Justice, revised edition. Cambridge, MA: Harvard University Press.