We left off last week with the Papal teaching on a Just Wage. This week, we follow that train of thought into the teaching on the relationship between wages and profits. We’ve already seen that laborers ought to share in the profits in some way since it is their labor that produces them. Pope St. John XXIII goes on to say that “any adjustment between wages and profits must take into account the demands of the common good of the particular country and of the whole human family.” He then identifies the “demands of the Common Good.”
The first aspect of the common good is the “employment of the greatest possible number of workers.” Obviously, this does not mean paying people who do not work, but we should allow the mind of Christ to challenge worldly ways of thinking here. Most businesses aim to employ as few people as possible in order to maximize profits, but the real goal of business is not profit. It is to provide a good or service to the community. Profit is necessary and a sign of a healthy business, but it is not the primary goal. Human beings need labor to be happy. So, there are times when a business could cut jobs for efficiency but shouldn’t. It is better for a community (and ultimately for a business) to prioritize the good of the human beings involved rather than sacrificing everything in order to get the maximum possible profit. Individual cases are going to be complex, but the guiding principle is straightforward: businesses serve people above all else. Sometimes it really is better to keep a few extra employees where it can be afforded than it is to cut them for the sake of a small increase in profit.
Another demand of the common good is to maintain “equilibrium between wages and prices.” The common practice of continuously increasing profit margins without increasing wages is immoral – it is a grave sin. If profit goes up, so should wages. The next demand of the common good is “the need to make goods and services accessible to the greatest number.” This should be obvious. Companies exist to provide goods and services to human beings, so they should provide them as widely as possible within their sphere of influence. This aligns pretty easily with basic business practices which say that expanding your market reach is good for profits. There is still a challenge here, however, in that there will be times when a company has the choice to stop providing services to certain areas that are more difficult and expensive to serve. Obviously, a company cannot operate at a loss, but it is contrary to the common good when they shut out small towns or rural areas simply because they make less profit than in other areas. If they can reasonably service a given area – especially when they provide an essential service like food or medicine – they should even if it leads to only minimal profits. Related to this is the way that pricing affects availability. One example is the price of insulin in our country. Although people literally die if they do not receive it, it is often quite expensive. If it were expensive to produce, such cost might be justified, but in the current situation, it is not expensive to produce. The profit margin on insulin is very high (some figures show as much as 90% of the cost being pure profit), with groups and companies making extra money on every step of the production, transportation, and prescription process. This causes it to be unaffordable for people, which can and often does lead to their death. All because companies operate on the principle of maximizing profit rather than maximizing access and service. This is evil. Such companies should lower prices to the point of making the product affordable to all who need it. Yes, it means lower overall profits. But when they are making literally billions of dollars a year in profits (not gross – I mean after operating expenses are factored in), they should be making less and providing more. We may not be able to create a solution, but we can recognize it as evil and resolve not to excuse, justify, or imitate it in our own business practices.
Next, after reiterating the limited but real right to private property, John XXIII focuses on a topic we might find appealing: the decline of rural areas and growth of urban ones. He points out that many people leave agriculture behind because they find it difficult to maintain a higher standard of living there and find it easier in the city to do so. Since agriculture is essential to the common good and because such workers still have the same rights as urban workers, the pope suggests that public authorities should work to help develop “essential facilities in country areas.” He goes on to say that economic development should be gradual in order to maintain balance across the different sectors of agriculture, industry, and service. He does say that government should assist in this endeavor, though he doesn’t give much detail. The point is that, rather than everyone pursuing profit at the expense of each other, we should work to serve the common good.