A little while ago I linked to posts on Crooked Timber about minimum wage, hinting that I was also preparing a post on the issue. This is that post. I am not however arguing from an economic standpoint, but from a moral and ethical one.
The strict utilitarian would argue that it is the consequences of an action that matter, not the content. I don't entirely accept this argument but I am not entirely clear about why I hold that belief. I believe for example that business and personal life should be governed by the same ethical principles, but that isn't a position universally accepted or if accepted, practiced. Are moral principles indivisible? Should we apply the same principles we adopt in our personal relationships to our economic life?
What follows is an incomplete exploration of the issues this question raises. Being neither an economist nor a philosopher by trade, I am doing this almost from first principles. While this is no bad thing, it almost certainly means I am going to get out of my depth. It also means I will no doubt be rehashing questions others have already dealt with much more effectively and in more depth than I can. Even so, I think it a worthwhile exercise - if only as an exercise in thinking philosophically.
In our relationships one with another we all have some standards by which we judge our own behaviour and that of others. I don’t intend to consider here what those standards should be, only how the existence of such a standard should affect our behaviour as 'free individuals' on the one hand and as 'business people' on the other.
This appears to be what underpins arguments that the economic benefits of an enterprise outweigh any loss to individuals and so justify any different treatment – even though those on the receiving end may perceive my behaviour as at best uncharitable. Strictly speaking this is not applying different standards because of course utilitarianism is not about absolute ethical standards. I don't however intend to deal with strict utilitarianism, a system with which most of us are instinctively uncomfortable since it can be used to justify any behaviour, however extreme that behaviour might appear. My primary concern is with other views of morality based not on the consequences of our actions but on the actions themselves.
Within any organisation, the business of that organisation will be transacted by a series of relationships between individuals. Similarly, relationships between businesses or between businesses and customers can be reduced to relationships between individuals. Consistency would therefore suggest that these relationships should be conducted according to the same ethical principles we use in our personal life. Dishonest behaviour by a business implies dishonest behaviour by individuals acting on behalf of that company. For this not to be the case, some extra principle must be established to explain or justify the application of different standards in business life than in our personal relationships.
Thus if I act on behalf of a business, I am responsible for my actions and for their outcomes. I cannot argue that economic expediency gives me license as a business for behaviour that would be unacceptable as an individual. I cannot logically separate my behaviour as an independent individual from my behaviour as a representative of a business.
I want to look at how this could affect business behaviour in two areas where economic expediency is commonly cited - pollution controls and payment of minimum wage.
If as an individual I knowingly or negligently dump waste material into your water supply leading to you or your family falling ill or dying, or if I knowingly or negligently sell you a product which is unsafe and causes you harm, then in both cases I have surely committed an act which could be described as unethical. This applies whether my actions are as an individual or on behalf of a business.
In cases like Minamata, the pollution issue seems straightforward. Surely no civilised society can accept the outcomes so movingly documented by Eugene Smith. (Although even this would not necessarily be accepted as true by the strict utilitarian) However, in cases where controls already exist and are for the sake of argument followed, Minamata notwithstanding, but government – or those on the receiving end of polluting activity – desire greater stringency, the position appears more complex. In the end however, assuming that the damage caused by the pollution is real, arguments against tighter controls boil down in the end to a utilitarian calculation of the costs to humans (or other sentients) as against the benefits to the business from not having to spend on pollution controls.
[UPDATE - it occurs to me that Ursula Le Guin's story, 'The ones who walk away from Omelas' is about making a moral judgement in the face of such arguments]
For this calculation to be valid some mechanism for distributing those benefits must exist. It is however difficult to conceive of a situation where damage to human health is acceptable simply to enrich a limited number of shareholders. A strict utilitarian assessment would presumably however accept apposition where a few shareholders benefited by huge amounts but not minor sums – a position which seems counter intuitive.
In the case of minimum wages, the argument is that economic damage would ensue by forcing payment of a minimum wage. What considerations should apply in reaching a decision? One consideration would appear to be that recipients of a wage should be getting enough money to live on without needing to have recourse to charity or other public benefits. Where this is not the case and society – either in the guide of charity or public welfare payments funded by government – makes up the deficit, it could be argued that the business concerned has externalised some of its own costs by offloading them to others.
Ii may be possible to argue that this should not happen, but is there an ethical issue? There are in practice two components to this question – the wage level and the making up of the wage by third parties.
Taking the wage level first, the ethical issue appears to be whether anyone should be employed at less than a subsistence level. (I don't intend to deal here with the wider question of inequalities in the distribution of wealth). Bearing in mind the argument that all business transactions are in the end reducable to transactions between individuals, is there any obligation on me – or you – as an individual to help someone in poverty?
If such help would simply transfer the poverty from the donor to the recipient, there would presumably, in the absence of any religious imperative, be no duty to offer assistance. In utilitarian terms we would argue that a transfer of benefit is irrelevant since there is no net increase in welfare. Passing over part of my income to place us both in poverty would moreover lead to a reduction in net welfare.
If however, by transferring some of my income or capital to another and so lifting them from poverty while still keeping me out of poverty would lead to a net increase in welfare and so the transfer should presumably take place.
Transferring this to the business context, it is clear that there are no longer just two parties involved, since customers of the business also have an interest. The managers/owners of a business would presumably argue that the wage levels they are paying are the maximum possible without increasing the price customers would be willing to pay. This assumes that the balance between costs and prices is correctly calculated. It ignores whether it would be possible to raise wages without increasing prices. It may for example be possible to accept a lower profit margin or it may be possible to redistribute the wage bill – after all in some companies the ratio of the highest to lowest salary/wage levels is very high (the so-called 'fat-cat' argument).
If none of these are possible, then the only option to meet an increased wage bill may be to raise prices. Depending on the nature of the product this could also have consequences for others who purchase it, perhaps to the extent of driving them below the poverty level.
At this point I begin to run out of steam and I am going have to think further. It seems to me however that a moral case can be made for setting a minimum wage level, especially since there seems no strong economic argument against it. In the case of pollution, there seems no argument but that the sort of polluting behaviour represented by the Minamata case is unacceptable on any argument, although I am less clear about the arguments for tightening controls – or more specifically about how to establish the acceptable levels, This appears to me to be a clear technical matter, but nevertheless one which arouses huge dispute on non-technical premises. The arguments over Kyoto and climate change are a classic case, where the scientific debate is buried in a morass of insult and ad hominem attacks.
I am preparing a post on climate change and may come back to this aspect of the argument again.
