Edward Quince's Wisdom Bites: Friedman Conversations Pt. 2

Conversation 2: Wages, Labor, and Economic Justice

Topic: Determining fair compensation and the ethical treatment of labor.

Rerum Novarum (Pope Leo XIII):
The value of labor is inseparable from the value of the person who performs it. A just wage is not simply a market outcome—it is a moral imperative. The worker’s livelihood must allow for a dignified life, ensuring no one is forced into misery or servitude. Justice precedes efficiency; the economy exists for the person, not the person for the economy.

Centesimus Annus (Pope John Paul II):
The protection and promotion of human rights are preconditions for a well-ordered society. The downfall of oppressive systems often begins with the violation of workers’ dignity. A just economy does more than provide subsistence—it nurtures the human capacity for creativity and vocation. True prosperity arises when labor is seen not merely as input, but as participation in the ongoing act of creation itself.

Friedman Doctrine (Milton Friedman):
These aspirations, though noble, confuse the proper domain of morality with that of markets. Wages are prices—determined by voluntary agreement between employer and employee within the “rules of the game.” If an executive unilaterally raises wages beyond what the market dictates, he imposes an unauthorized tax on shareholders. The moral impulse cannot override the economic function without distorting both. Profit remains the measure of success.

Calculus of Value (CV):
From a valuation lens, costs—wages included—flow directly through to profit, which defines enterprise value. A low-cost producer gains competitive advantage not by moral argument but by arithmetic. Yet financial discipline does not preclude moral awareness. The task of management is to balance optimization with sustainability—avoiding the arrogance of “knowing better than the market,” while remembering that human behavior, not equations, drives both cost and value.

Reflection:
If Rerum Novarum teaches that labor is sacred and Friedman insists it is priced, then perhaps Centesimus Annus and the Calculus of Value remind us that both truths must coexist. Wages are a number—but also a signal of what a society values. The moral measure of a market may not lie in how efficiently it clears, but in what it chooses to honor.