Concerns about the payment of just wages are part of more general discussions about the topic of a just price, which occupied a large place in the writings of the Scholastics. These scholars generally held that a just price is to be determined by the lowest price commonly paid for that good. Classical Roman law made price illegal if it was more than fifty percent above or below the just price. However, the Scholastics generally held that, as a matter of conscience, the upper and lower boundaries should be narrower than for those required by law. For example, Juan de Lugo² said that a price outside a ten-percent boundary on either side of the just price would be unjust.

The issue of a just price quickly faded from consideration by economists once it became clear that no objective standard could be applied with certainty to justify a particular price. It was not the labor content itself (as early writers claimed, and Marx assumed) that mattered but, rather, what buyers were willing and able to pay for the product or service and what others were willing to accept in return for the labor and other resources used in production.

Furthermore, Adam Smith (1723–1790), the father of economics, introduced the notion that free competition among buyers and sellers eliminates any surplus profits, thereby giving consumers the best prices possible. The term that he coined, the invisible hand, referred to the nature of competitive markets and the natural inclinations of economic actors. Both are intended by the Creator to improve the material well-being of the masses by means of individual pursuit of self-interest (e.g., by creating high-quality products, in order to attract customers). Smith assumed a role for governments, institutions teaching morality, and schools—namely, to address human needs and weaknesses not adequately handled by markets.

Whereas medieval laws set both minimum prices (meant to protect sellers) and maximum prices (meant to protect buyers), public policy from the period of Adam Smith onward has gradually accommodated itself to market-determined prices. It is understood that prices set in competitive markets are fair to both parties as long as they are voluntarily agreed to. Michel says that prices are the result of the dialogue over scarce resources, which takes place between human beings in markets.

Of course, governments may intervene—with regulation or antitrust action—in cases where monopoly power tends to cause prices to be unusually high. However, apart from those cases, it is judged that prices can be fairly and efficiently determined by the interaction of market supply and demand. (Efficient allocation of scarce resources argues for market-determined prices, except where externalities exist, as in the case of polluting industries, which use free air and water for waste disposal, and therefore underprice and overproduce their products.) In modern times, the main departures from this hands-off policy regarding prices have included the following: maximum interest rates (regulated by usury laws), rental ceilings (under rent-control laws), minimum prices of certain agricultural commodities (regulated by direct government purchases when market prices are too low for farmers), and maximum prices of some essential consumer products, such as gasoline or grain. The prices of necessities are sometimes kept low by law, public subsidy, or governmental payments of confiscatory prices to farmers.

From the beginning, writers on just prices assumed that this doctrine included a just price for labor; in this case, just wages. The norms were to be determined by what was customarily paid for the particular labor services provided, given the circumstances under which they were provided. Those circumstances included such things as the amount of education required for the work (a reason for paying higher wage rates), whether the employer was offering training or time off for studies, and whether the worker received honor for the work done (the latter circumstances being reasons to justify paying lower wage rates).

What was not permissible, according to the Late Scholastics, was that family needs or circumstances of the worker play a role in the determination of a just wage. Furthermore, writers such as Juan de Medina made it clear that because circumstances—like scarcity, risks, and expenditures—change over time, prices (hence also wages) could not be constant.⁴ Throughout this article we argue in a similar vein; namely, that any attempt to regulate wage rates by moral or legal injunction is confounded by the fact that they change over time—and must do so in response to changing circumstances. If they do not, both justice and efficiency are compromised.

The Late Spanish Scholastics were the first to analyze systematically markets, prices, and wages (along with money, taxes, and private property). They argued that wage rates, like other prices, were subject to variations in factors affecting demand and supply. Furthermore, they showed that legal enforcement of maximum prices or minimum-wage rates would often be counter-productive. Thus, they reasoned that unemployment would be an undesirable consequence of setting minimum-wage rates. They held that the dimension of justice most applicable to prices and wage rates was commutative, not distributive justice. Consequently, the relevant moral issue in exchange is whether the parties have voluntarily entered into the exchange, not the particular price to which they agree.

Clearly, no deep Christian thought or reflection on Scripture can sustain a claim that Christians dare be indifferent to poor people. The Scholastics were not an exception. Although they argued that extensive governmental intervention with prices and wages would violate justice in exchange, they also held that Christians with the means are morally obliged to help the poor. Two avenues they recommended were giving to charity (even if that required the givers to cut back on their purchase of luxury goods), and feeding the poor, for example, instead of dogs.

Any update of discussions about just wages should expand upon the work of the Late Scholastics but not detract from their keen analysis of problems that result from attacking poverty via setting wage rates rather than by measures to increase workers’ productivity. We will elaborate on this matter in the section that follows.

A proponent of just wages might not insist that they be made a matter of law but, rather, a matter of conscience. It is not clear from Laborem Exercens (LE) what John Paul’s opinion is regarding this distinction. Neither is it clear whether he intends that the doctrine be applied with a range of different wage rates being paid to those providing the same service but having different needs (e.g., due to family size). As we said above, the Late Scholastics disapproved of the latter. To our knowledge, however, they did not elaborate on how such detailed wage setting would severely interfere with the ability of workers to provide for themselves.

Modern economists—Christian and otherwise—point out that requiring a high wage rate for a ditch-digger with a family (or carpenter, or any other type of worker) than for one without dependents would have unfortunate consequences. Not only would these wage rates cause many employers to avoid hiring workers with families, but they would also raise the cost of things produced by the higher-cost workers, thereby hurting poor consumers. By contrast, higher wages typically paid to carpenters (with or without families), compared to ditch-diggers, have the extremely desirable effect of encouraging workers to gain the needed skills. This, in turn, leads to lower prices and higher living standards for everyone, including the poor.

In addition to the disincentive problems just mentioned, when wage rates are set according to family circumstances, there is also an unavoidable information problem. It would be difficult for employers to determine which workers deserve a higher wage. Must a worker who has a family but also a large inheritance, be paid more than a single person? How much is needed for a family with three children, when one child might require that the family home accommodate a wheelchair, or hire a tutor for a child who cannot safely attend school? These are the sort of information problems that already cause injustices, very high administrative costs, and unwelcome intrusions into family lives when public benefits are allocated through Medicaid and Medicare. Most people would much prefer that such burdens not be imposed on the whole population through the setting of each worker’s wage rate.