Business, inflation, salaries – the Catholic approach

When inflation spikes: Do employers have a moral obligation to raise salaries?

Prices on gas, food, and other essentials are spiking, and many families are finding that their salaries are not going as far as they used to.

What Catholic social teaching tells us

Catholic social teaching promotes human flourishing as the desired outcome of social, economic, and political affairs. Does that mean employers are morally obligated to increase their employees’ wages to keep pace with higher prices?

It’s not that simple, say experts on business ethics at two leading Catholic business schools.

Andreas Widmer, director of the Arthur & Carlyse Ciocca Center for Principled Entrepreneurship at The Catholic University of America’s Busch School of Business, says an increase in inflation does not necessarily require an increase in wages.

“Catholic social teaching (CST) is not like the Ten Commandments; the Ten Commandments tell you what to do. Catholic social teaching does not tell you what to do: it tells you how to think.”

Describing Catholic social teaching as a “mental model”, Widmer explained that it helps people think about the “ultimate end of things, and informs a well-formed Christian conscience of what to do”.

“Catholic social teaching is not a paint-by-numbers management book. It forms your thinking, so you have a well-formed conscience to act in the moment,” said Widmer. “I think there is very little prescriptive stuff in Catholic social teaching on purpose.”

While most companies adjust pay for inflation as a matter of course, Widmer said, employees aren’t bound by Church teaching to increase pay if it would put the very health of their business in jeopardy.

“Do to your employees what you wish your employer would do to you. Because you know what you are able to do and what you are not, and act accordingly. It’s like tithing, you don’t give a specific amount, you give what you can,” said Widmer.

On the other hand, “if a company’s profits suddenly go up because of the scarcity of things, I think there is a moral obligation to reward, compensate, include the employees who help you create this value to adequately share the rewards with them,” he said.

What is a just wage?

Catholic social teaching, Ronald Jelinek, Professor at Providence College’s School of Business, offers two “goalposts” for determining what is the “just” treatment of an employee.

“First, as Pope John Paul II offers in Centisimus Annus: ‘A workman’s wages should be sufficient to enable him to support himself, his wife and his children.’”

“However, Pope Pius offers the other goalpost in Quadragesimo Anno: ‘In determining the amount of the wage, the condition of a business and the one carrying it on must also be taken into account; for it would be unjust to demand excessive wages which a business cannot stand without its ruin and consequent calamity to the workers’.”

Jelenik explained that while inflation makes “yesterday’s ‘just’ wage becomes no longer ‘just’ today”, it also raises costs for employers.

“To make matters more difficult, in some sectors of the economy, there are industries where costs are going up but top line revenues can’t because these companies cannot sell product. The current supply chain crisis makes this evident — from cars that global manufacturers can’t sell because they are waiting on chips produced overseas to small businesses that can’t sell glass shower doors because they can’t get metal hinges — it’s hard to pay employees more when employers can’t sell product,” he said.

Citing “an oft-overlooked pearl of wisdom from CST,” Jelenik advises employers to consider that “tough times call for sturdy employees and sturdy employers.”

“After all, CST emphasises that a cooperative spirit is at the heart of what makes for an healthy — and enduring — employee-employer relationship. So, both individual employees and employers are asked to prudentially discern what their obligation is to each other — in good times and in more difficult times as well,” he said.

Beyond inflation: Employees usually treated as a means to an end

A business consultant and former CEO, as well as a professor at a Catholic University, Widmer served as a Pontifical Swiss Guard protecting Pope John Paul II as a young man. In speaking of business ethics, he frequently refers to the teaching of the pope he protected.

He advises CEOs to “love their employees”. “Just sit down with your employee and show them that you love them. Pope John Paul II used to say that you should love your employee. Now in English that sounds so weird, but in Italian you wouldn’t say ‘Ti amo’ (‘I love you’), you would say, ‘Ti voglio bene,’ (‘I want good things for you’).

“It doesn’t matter whether they are Catholic or not, if you wished them well and say I am going to do anything to help you become the best version of yourself…then that is the true Catholic approach to business. Love your employees, that’s how you want me to treat you therefore that’s how you treat me. It’s the Golden Rule,” he said.

—Adapted from Aleteia

A Catholic employer’s reading list

Rerum Novarum

Quadragesimo Anno

Centesimus Annus

A Catechism for Business: Tough Ethical Questions & Insights from Catholic Teaching by Andrew Abela and Joseph Capizzi

Papal Economics: The Catholic Church on Democratic Capitalism by Maciej Zieba

Force for Good: The Catholic Guide to Business Integrity by Brian Engelland