If the imposition of a just wage by government is problematic in industrialized countries, it is the cause of great mischief and injustice in developing countries. Many poorer countries have patterned their labor organizations and laws after those of wealthy countries (although enforcement is much more lax). Thus, there are unions (active mostly in urbanized industry) and often an official minimum wage, or a whole wage schedule set by law. The result has been a very unfortunate skewing of wages and incomes in favor of urban areas and industrial development that uses more capital and smaller workforces than would otherwise prevail.

Higher wages in urban areas act to draw larger numbers of people out of agriculture and rural areas than can be accommodated in tolerable, urban living conditions. Even more disastrous is the impact of artificially high wages in the formal sector (the only one over which government has much control). The high cost of labor induces employers to replace labor with machine-based technologies. The immediate outcome is that open unemployment rates among low-skilled workers are high. Ironically, those least able to depend on the support of local relatives while unemployed, end up as an overflow into the informal sector. There, because labor laws do not touch them, small employers are able to set up small businesses using relatively cheap capital and more workers who are paid a lower wage rate. Those who are unlucky, unconnected, or unskilled enough not to find employment in this sector often become self-employed, doing everything from juggling on the tops of cars to selling sugar by the cube. Rarely is what they earn close to what would be considered a living wage by those who have jobs in the formal economy.

An outsider, coming from a rich country, is likely to be aghast at the sight of what would appear to be injustice in developing countries. Can it possibly be just if so many people are without jobs, or earning much less than a living wage, when that would be morally scandalous in a rich country? The bald truth is that such a low standard of living is the product of low productivity of labor in poor countries. This is due not only to low education rates but also to other disadvantages, such as the lack of adequate physical infrastructure to connect regions of the country to each other, and the country to the outside world. Without these, people cannot take advantage of domestic and foreign markets to enhance their incomes as workers and producers.

Of course, international trade is poor countries’ link to outside markets. In this setting, the presence of a minimum wage slows economic development by making the products that poor countries offer to world markets less competitive. It has been shown over and over again that countries that engage in open trade, experience faster economic growth and lower poverty levels than those with closed and/or government-managed access to world markets.

Thus, what would appear to be a simple remedy for injustice, having government require a living wage, is offset by more injustices than it solves, namely, high unemployment, growing urban slums, and a poverty trap for poorer regions, ethnic groups, women, and whole nations. The answer to Third World poverty is far more complex than is possible to elaborate in this article. However, the main outlines can be mentioned.

Ensuring a living wage is all about making people more productive so that their wage or self-employment incomes rise over time. Time is a key link to the earlier part of this article. It is inaccurate and unhelpful to look primarily at one moment in time to judge injustice, in the sense that we have used here. Instead, individuals, firms, policy makers, and even charitable organizations must make decisions about today on the basis of reasonable expectations about the future, as well as on intimate knowledge of their own skills, callings, and opportunities.

Analysis of economic development in recent decades shows that the essential ingredients for strong economic growth include all of the following:

• Strong macroeconomic policy—regarding taxes, expenditures, and the money supply—so that inflation does not overcome the country, for example. The latter hurts the poor and can cause huge economic distortions that lead to financial crises and inhibit further growth.
• An open market—relatively low barriers to trade (such as licenses, tariffs, and so forth) and to capital flows.
• Strong governmental institutions to ensure the protection of people, property, and contracts—including laws and widespread access to courts.
• Privatization of many industries previously owned by the government—for example, telephone service, rail transportation, banking, and extractive industries. This is necessary because government-controlled producers are neither willing nor able to produce and distribute these goods and services as efficiently as private firms do. Furthermore, they overwhelmingly distribute them to those who are already well-off.
• Significant spending on infrastructure (electricity, dams, irrigation, roads, flood control, communication networks, sewage systems, and so forth). It is especially important that private-sector firms take part; local communities be involved in assessing needs, providing sweat equity, monitoring quality, and maintaining upkeep; and that various levels of government help with coordination and funds.
• Investment in the development of human capital, through private and public spending on education and health care—especially targeted to the most disadvantaged groups and regions.

By such means, the future is opened up for the poor. The obvious dynamic goal of individual and collective action, in the name of economic justice, is to raise the incomes of the poorest people in the poorest countries to a level that would be considered a living wage, at least by a majority of the people of those countries. A minimum wage (even one calibrated to local norms) would tend to nullify all of the above conditions. For example, it could result in macroeconomic instability and inflation. It could make too expensive the very infrastructure that needs to be built, and hence, unavailable to the poorest persons and regions. Likewise, education and health would be much less-affordable and therefore concentrated—as they are now—on those who are well-off. Furthermore, incentives for individuals to increase their skills, save, acquire assets, and invest in small businesses would fall, to the extent that people with inadequate incomes expect that, by waiting long enough, they might get a job at the minimum wage in the formal sector.

People living in rich countries, whose ancestors lived in rural or urban poverty a generation or two ago, understand that the same problems confront today’s poor countries as they did their near or distant ancestors. The minimum wage is a twentieth-century invention, which only became possible to consider in a time when the productivity of workers who were paid the lowest wages was not far below the minimum wage. No wonder that during the nineteenth century, when the U.S. economy was developing, minimum wages were not imagined as a primary tool for justice. Instead, over decades, private and public investment in infrastructure and education, small savings used to pay for tools and other capital, and the collaboration of family members in work on the farm or off, caused the average standard of living in America to rise and the percentage of persons in poverty to fall. This is precisely the pattern that would have been severely impeded by a premature enforcement of a minimum wage.

Again, it is dynamic improvement over time that should be the moral objective of those concerned about conditions in poor countries, not a sudden improvement in wages for only a minority of workers. Emphasis on a dynamic approach to remedying the inhumane conditions of poor workers in all countries is in keeping with the thoughts of Pope John Paul and other Christian thinkers pondering the nature of human beings. Poor workers are to be respected as acting persons, not objects, when they make individual choices and willingly collaborate with others. Such respect for human beings is forward-looking, in the light of Christian hope in God and his church, for this world and beyond. One thing that many international Christian organizations do well is to help families and communities exercise solidarity and build hope by encouraging forward-looking vision and planning, as well as more resources to expand health care, education, and small businesses.