Are Employers Obligated to Pay Their Employees as Much as They Can Afford?
Andrea is a rich entrepreneur who starts a new business. Emma agrees to be her employee, accepting a wage of $15 per hour. Andrea could, however, afford to pay Emma $20 per hour. Is she doing something wrong by not offering her the higher wage?
My view is that Andrea acts permissibly. For one, the mere fact that someone can afford to pay a higher price for something does not obligate them to pay that higher price. Suppose a coffee shop charges $2.50 for a cup of coffee. You could afford to pay more than that. But I take it that few, if any, people think you’re morally obligated to pay $10.00 for the coffee simply because you can. Similarly, the mere fact that Andrea can afford to pay more for Emma’s labor does not obligate her to pay more. (I elaborate on this idea in an earlier post titled “Moral Confusion About a Living Wage.”)
Furthermore, the money that Andrea could have given Emma doesn’t vanish—she still has it. Maybe she’ll spend it on an Uber ride, which would benefit the Uber driver. Or maybe she’ll invest it in another business, which would benefit customers and employees. So the money that doesn’t go to Emma will ultimately help others. Think back to the coffee shop. The extra $7.50 you could have spent on the coffee doesn’t disappear. You’ll put it to a different use that will benefit someone else. The case of an employer is no different.
Is Andrea obligated? No. Might one sometimes pay more than is asked? Yes. For example, we had a neighborhood business do snow removal and lawn mowing for years. The owner informed us he was discontinuing the business and moving into landscaping. He told us one of his former employees (who was mentally slow) needed a job and wanted to continue working. We hired him. He started out charging too low a fee. We told him this was too low and paid him a fair market rate and suggested he use this to help him negotiate with other customers. That was almost a decade ago and he is still in business. Had we taken advantage of him, he would probably have left the business and then we would have to find someone else.
I fully agree with the point made.
It might be useful, however, to consider why some people might think Emma "ought" to pay Andrea more. And that requires thinking about a price or wage as being two things wrapped into one: an incentive and an income transfer. And while most people would probably agree that the incentive "shroud" be that which maximizes the mutual benefit of the transaction (in the absence of other factors the one freely agreed upon), some people might think that rich Emma "ought" to transfer income to poorer Andrea.