The Responsibility of Employers

Christians quote the prophet Malachi's condemnation of employers who defraud their labourers.

So I will come near to you for judgment. I will be quick to testify against sorcerers, adulterers and perjurers, against those who defraud laborers of their wages, who oppress the widows and the fatherless, and deprive aliens of justice, but do not fear me," says the LORD Almighty (Mal 3:5).

Malachi puts those who defraud their labourers in the same basket as liars and adulterers. These are specified as crimes in the Ten Commandments, so defrauding wage earners falls into the same category. Defrauding a labourer is theft, because it deprives him of something that legally belongs to him.

Malachi does not actually specify what these employees were doing. However, we must understand that the prophets did not decide for themselves what is right or wrong. The prophetic role was to challenge those who break God's laws, so we would expect the sins and crimes they challenge to be clearly defined in the Old Testament laws. This is the case.

The law specifies several ways that an employee can be defrauded.

Paying a low rate of pay is not a breach of God's law. Paying a market wage to a person who is destitute could be a breach of the law.

Low Wages

The Bible does not specify a particular wage rate for a particular task. This would be impossible because wages vary according to the type of work and the availability of workers. What is low in America might be high in another country. There is no such thing as a just wage. Biblical justice is more concerned about the process than about the wage level. If the process of wage negotiation were just, the wages are not unjust. A just wage is a rate agreed by an employer and an employee without coercion.

The Bible does not forbid the payment of different rates to different people. Jesus said that an employer is free to offer whatever wages he chooses, provided that no one is forced to accept those wages (Matt 20:1-16). Employers can offer a low wage rate, if they choose. If they go too low, they may find that no prospective employees accept their offer. They may have to offer higher wages to get staff. On the other hand, if many people are looking for work, their low offer might be accepted.

Offering a low wage is only wrong, if the person receiving the offer is so destitute that they have not choice but to accept the low wage. Their circumstances mean that they are forced to accept the offer. This is fraud.

Minimum Wage

According to the economic theory, an increase in the minimum wage increases unemployment, because employers stop employing people whose productive capacity is less worth than the increased legal minimum. This is only true, if employers actually know exactly how much a potential employee is worth to their business. This is almost never the case. If a business has several employees and uses capital equipment, it is almost impossible to determine accurately how much an individual employee contributes to the income of the business. Accounting tools for determining this do not exist.

The result is that most employers do not know what a potential employee is worth to their business. Therefore, they do not know if they are worth more or less than the legal minimum. (The television program Undercover Boss shows that most bosses do not have a clue about what their employees are worth).

Most employers of unskilled staff just take the easy way out. They do not bother trying to work out how much a potential staff member is worth, they just pay them the minimum wage instead. Some will pay a few dollars above the minimum wage, so that they feel better. The minimum wages does not just affect the poor, it has also corrupted employers, causing them to stop thinking about what their employees are worth. They just take the easy way out and pay what the state dictates.

This behaviour makes the minimum wages the benchmark for many low paid people, not just those who are at the minimum. It means that the minimum wage will have to be increased from time to time, because that is the only way that wage rates benchmarked to it will change. Employees cannot rely on employers to work out what they are worth and pay them more when they deserve it, so they need an adjustment in the minimum wage rate to give them any increases that they may deserve.

While we have a minimum wage and a high level of inequality, regular increases in the legal minimum will be needed. Arguing that the minimum wage increases unemployment is irrelevant, because though in theory, it should, in practice it does not. This has been confirmed by statistical studies.

The only argument against the minimum wage is that it is immoral. The government should not be intervening in wage contracts. That will only be realistic, if employers get much better at working out what their employees word, and pay those at the bottom a margin to allow for the potential errors in their assessment.

Employment Contracts

All exchanges in a free market are legitimate, provided:

and the buyer and seller freely agree on the price.

Labour market transactions are different. Once a person becomes an employer of labour, they take on additional responsibilities. They are not free to pay what the market will bear. They cannot just pay the lowest wage rate that they can get away with.

God's Instructions for Economic Life set some boundaries on employment contracts. When a person employees another, the employee becomes a "neighbour", as defined by the law. Employees are neighbours, and should be treated as such. A critical part of being a good neighbour is to pay generous wages. God's people should not be satisfied with paying the minimum wage. God expects more than that. They should pay the person enough for them to live on.

The employer should not just think about their convenience. They must do what is best for the employee. If the person were really poor, they would not be able to wait until the end of the week for their money, because they would be without food. Even though it is inconvenient for the employer, the poor person should be paid each day. They have done the work, so they are entitled to the pay. In the modern world, weekly or fortnightly pay has become the standard, but that makes life really hard for some people.

Do not defraud or rob your neighbour. Do not hold back the wages of a hired worker overnight (Lev 19:13).

God's guidance for economic life says that holding back the wages of a hired worker overnight is the same as defrauding them. Employees are not disconnected people. They are neighbours that employers must love and care for

Jesus told employers that they should be considerate in the parable of the workers in the vineyard (Matt 20:1-16). The employer promised to pay the employees who only worked for part of a day "what is right"(v 4,7). The Greek word is "dikaion", which means righteous. This employer wanted to do the right thing. For Jesus listeners, what is right would be what is specified by the law. The workers who were employed for the whole day were offered a denarius. That was the standard pay for a day's work at that time.

The employer paid every worker a denarius, even though some had only worked for a few hours, while others had worked for a whole day. The reason was that a person needed a denarius to buy a day's rations. These people were on the poverty line, living from one day to the next. The employer was being a good neighbour. He decided to pay each person enough to buy food for the day. This was a generous application of the command to pay employs each evening (Deut 24:15). An employer has an obligation to give his neighbour enough food that he will be strong enough to work the next day.

Don't I have the right to do what I want with my own money? Or are you envious because I am generous (Matt 20:15).
Being considerate and providing for a neighbour is more important than being fair.

According to God's Instructions for Economic Life, all employees are neighbours of their employer. This makes employment contracts different from every other contract. God expects a good neighbour to pay their employees enough to live on. This is not well understood. If Christians put this requirement into practice, the impact on poverty would be huge.

See Free Markets.