Compensation

Compensation

Compensation, as considered in the present article denotes the price paid for human exertion or labour. Wherever men have been free to sell their labour they have regarded its compensation as a matter that involved questions of right and wrong. This conviction has been shared by mankind generally, at least in Christian countries. At the beginning of the fourth century, the Emperor Diocletian issued an edict which fixed the maximum prices for the sale of all goods, and appointed a legal schedule of wages for nineteen different classes of workingmen. In the preamble of the edict the emperor declares that his motive is to establish justice among his people (Levasseur, "Classes ouvrières avant 1789", I, 112-114). Throughout the Middle Ages and down almost to the beginning of the nineteenth century, there was considerable legal regulation of wages in most of the countries of Europe. This practice indicated a belief that the compensation of labour ought to be brought under the rule of law and fairness, as these legislators conceived fair dealing.

The Fathers of the Church implicitly asserted the right of the labourer to sufficient compensation for the maintenance of his life when they declared that God wished the earth to be the common heritage of all men, and when they denounced as robbers the rich who refused to share their surplus goods with the needy. The theologians and canonists of the Middle Ages held that all commodities should be sold at that price which the social estimate regarded as just; but they insisted that in arriving at this estimate the community ought to take into account the utility, the scarcity, and the cost of production of the commodity. Inasmuch as the cost of production at that time was chiefly labour-cost, or wages, a just price for goods would necessarily include a just price for the labour that produced the goods. St. Thomas reflects the common view when he says that labour as well as goods should bring a just price (Summa Theologica, I-II, Q. cxiv, a. 1). Langenstein, in the fourteenth century, is more specific; for he declares that anyone can ascertain the just price of the wares that he has to sell by referring to the cost of living of one in his station in life (De Contractibus, Pt. I, cap. xii). Since the seller of the goods was generally the maker of them also, Langenstein's rule was equivalent to the doctrine that the compensation of the master-workman should be sufficient to furnish him a decent livelihood. And we know that his remuneration did not differ greatly from that of the journeyman. From the meagre accounts that have come down to us, we are probably justified in concluding, with Professor Brants, that these standards of compensation and the methods of enforcing them generally secured to the medieval labourer a livelihood which the notions of the time regarded as becoming (Théories économiques aux xiii ^e et xiv ^e siècles, p. 123). At the beginning of the seventeenth century we find such writers as Molina and Bonacina asserting that the customary compensation of a place is, generally speaking, just compensation, and assuming that the worker has a right to a living from his labour.

To-day Catholic teaching on compensation is quite precise as regards the just minimum. It may be summarized in these words of Pope Leo XIII in the famous Encyclical "Rerum Novarum" (15 May, 1891), on the condition of the working classes: "there is a dictate of nature more ancient and more imperious than any bargain between man and man, that the remuneration must be sufficient to support the wage-earner in reasonable and frugal comfort. If through necessity or fear of a worse evil the workman accepts harder conditions, because an employer or contractor will give him no better, he is the victim of fraud and injustice." Shortly after the Encyclical appeared, Cardinal Goossens, the Archbishop of Mechlin, asked the Holy See whether an employer would do wrong who should pay a wage sufficient for the sustenance of the labourer himself but not for that of his family. An unofficial response came through Cardinal Zigliara, saying that such conduct would not be contrary to justice, but that it might sometimes violate charity, or natural righteousness — i. e. reasonable gratitiide. As a consequence of the teaching of Leo XIII, there has been widespread discussion, and there exists an immense literature among the Catholics of Europe and America concerning the minimum just wage. The present Catholic position may be summarized somewhat as follows: First, all writers of authority agree that the employer who can reasonably afford it is morally obliged to give all his employees compensation sufficient for decent individual maintenance, and his adult male employees the equivalent of a decent living not only for themselves but for their families; but not all place the latter part of the obligation under the head of strict justice. Second, some writers base this doctrine of a minimum just wage upon the principle of just price, according to which compensation should be equivalent to labour, while others declare that it is implicitly contained in the natural right of the labourer to obtain a decent livelihood in the only way that is open to him, namely, through his labour-contract and in the form of wages. The latter is undoubtedly the view of Leo XIII, as is evident from these words of the Encyclical: "It follows that each one has a right to procure what is required in order to live; and the poor can procure it in no other way than by work and wages."

Authoritative Catholic teaching does not go beyond the ethical minimum, nor declare what is completely just compensation. It admits that full and exact justice will frequently award the worker more than the minimum equivalent of decent living, but it has made no attempt to define precisely this larger justice with regard to any class of wage-earners. And wisely so; for, owing to the many distinct factors of distribution involved, the matter is exceedingly complicated and difficult. Chief among these factors are from the side of the employer, energy expended, risk undergone, and interest on his capital; from the side of the labourer, needs, productivity, efforts, sacrifices, and skill; and from the side of the consumer, fair prices. In any completely just system of compensation and distribution all these elements would be given weight; hut in what proportion? Should the man who produces more than his fellow-worker always receive a larger reward, regardless of the effort that he has made? Should skill be more highly compensated than work that is degrading and disagreeable? Even if all men were agreed as to the different factors of distribution and their relative importance, from the side of capital and labour, there would remain the problem of justice to the consumer. For example, ought a part of the benefits arising from improvements in the productive processes to go to him? or should they all be appropriated by the agents of production? Pope Leo XIII showed is practical wisdom when, instead of dealing in detail with this question, he insisted strongly on the practice of arbitration. When wage-disputes are submitted to fair arbitration, all the criteria and factors of distribution above enumerated are usually taken into account, and accorded weight in conformity with practical justice. This is not, indeed, the same as ideal justice but in most cases it will approximate that goal as closely as is feasible in a world that is not absolutely perfect.

LEVASSEUR, Les classes Ouvrières en France avant 1789 (Paris, 1900); CAPART, La propriété individuelle et le collectivisme (Namur, 1898); BRANTS, Les théories économiques aux xiii ^e et xiv ^e siècles (Paris, 1895); GARNIER, De l'idée du juste prix (Paris, 1900); ASHLEY, English Economic History (London, 1893); PALGRAVE, Dictionary of Political Economy (New York, 1891), s. v. Government Regulation of Industry; LEO XIII, Encyclical, Rerum Novarum; VERMEERSCH, Quœstiones de Justitiâ (Bruges, 1901); POTTIER, De Jure et Justitiâ (Liège, 1900); MEYER ET AL., Die soziale Frage, reprinted from the Stimmen aus Maria-Laach; RYAN, A Living Wage (New York, 1906).

JOHN A. RYAN.