Toward a Trinitarian Understanding of the Free Market

1in_god_we_trustThe concept of the Trinity is foundational to the Christian life. This fundamental doctrine teaches that there are not three gods but one God in three persons (Father, Son, and Holy Spirit). Each person of the Godhead is equally, eternally, and fully God. There is unity among the three persons of the Godhead; they are “equal in every divine perfection” yet “execute distinct but harmonious offices in the great work of redemption.”

All human relationships reflect the Trinity. Because God created us in His image, we are relational beings. We were created to live in community. Although some types of social relationships are more intimate and lasting than others, all relationships are interpersonal and require at least some cooperation and interdependence. Furthermore, just as there are different roles among the persons of the Trinity, there are also roles within every social relationship.

Theologians often point to God’s design for the family as one example of this phenomenon. Familial relationships are characterized by interdependence, cooperation, and mutual service. The husband is called to lovingly exercise headship over the family, following the pattern of Christ and the church. Conversely, the wife joyfully submits herself to her husband’s proper exercise of authority, and children submit to their parents. Thus, the biblical pattern for family exemplifies the interdependence and interpersonal cooperation of the Trinity.

This Trinitarian pattern also applies to our relationships in the marketplace. Consider the relationship between employer and employee. Employers are called to lovingly and righteously exercise authority over their employees, and their employees are called to submit joyfully, so long as the employer isn’t directing the employee to engage in unholy or illegal behavior. In doing this, the employer and the employee glorify God by imitating the Father’s proper exercise of authority and the Son’s joyful submission as well as through acting righteously toward each other.

Even economic exchange between strangers reflects the Trinity and glorifies God. “Society under the market economy means a state of affairs in which everybody serves his fellow citizen and is served by them in return,” wrote the famed economist Ludwig von Mises.

This axiom is obvious to those who have studied the market economy. The businessman serves his customers by producing the goods and services they desire, and the customers compensate the businessman for those goods. The employee serves his employer by providing his labor, and the employer returns the favor by remunerating the employee for his work.

Through its division and specialization of labor, the market drives every person to rely on everyone else to supply his needs. No one person is self-sufficient. By fostering interdependence and interpersonal cooperation, the relational nature of economic exchange reflects the relational nature of the Trinity. Accordingly, the free market bears the mark of its Creator.

The nineteenth-century Christian philosopher and economist Frederic Bastiat affirmed this truth:

“We should be compelled to contemplate the Divine plan that governs society… And see how, by means of social [economic] laws, and because men exchange among themselves their labors and their products, a harmonious tie attaches the different classes of society one to the other! It is therefore certain that the final result of the efforts of each class is the common good of all.”

Adam Smith, renowned by historians as the father of modern economics, famously wrote that market participants “are led by an invisible hand… without intending it, without knowing it,” to “advance the interest of society.” Even when they are merely seeking their own benefit, market participants are led by the mechanisms of profit and loss to use their productive energies to meet the needs of others. Christians recognize that this invisible hand must be God, who uses the laws of economics that He created to guide market participants into the service of others.

In the free market, this mutual service through economic exchange is voluntary. No party is forced to supply the needs of the other. Instead, profit and loss direct individuals into the service of their fellow men. Assuming the absence of force and fraud, the people and companies who earn the greatest profit are those who best serve the needs of their customers. Christianity understands this and therefore affirms that profit is morally good.

In Matthew 25:35-36, Jesus commands His disciples to attend to the needs of others. Can it not be said that this is accomplished through the mechanisms of the market, at least in part? Do food workers not feed the hungry? Do pipe workers not help supply water to the thirsty? Do retail workers not help to clothe the naked? Do doctors and nurses not attend to needs of the sick?

This explains why the Christian Reformers believed that all work is sacred and provides an opportunity to glorify God. All work, even the most mundane, is a high calling. God uses our work and economic exchange to provide for ourselves and others. Through the process of voluntary market exchange, we glorify God by reflecting the Trinity’s interdependence and interpersonal cooperation in our own lives.


This post was published by Baptists for Liberty.

Care About The Poor? Why Withdrawing From Paris Agreement Helps Those Most Vulnerable

3329557-eiffel-tower-2Are you truly concerned about the poor’s economic welfare? If so, you should be celebrating President Trump’s announcement that the United States will withdraw itself from the Paris Agreement.

The Paris climate accord, which was ratified last year, attempts to “brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects.” Supporters of the agreement claim it is necessary to avert the disastrous consequences of climate change.

Regrettably, the plan’s supporters are committing the greatest economic fallacy, which Henry Hazlitt, the acclaimed economics writer, warned about in his most prominent work, Economics in One Lesson (1946):

“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of the proposed course; the good economist looks also at the longer and indirect consequences.”

While laypeople, pundits, scientists, and economists have focused their attention on what Trump’s decision might mean for climate change, these groups have largely ignored the effect of the agreement on poorer American households. Here are three reasons why withdrawing from the Paris Agreement is good for the poor:

 

1. The Paris Agreement raises energy costs for hardworking American households.

Under the agreement, the United States pledged to reduce its greenhouse gas emissions by 26-28% below its 2005 level by 2025. This would be accomplished by transitioning from fossil fuels to renewable sources of energy.

Although renewable energy will likely become the technology of the future, prematurely transitioning to “greener” sources creates a problem for Americans struggling to make ends meet.

Right now, these alternative sources of energy are far more expensive (and less reliable) than traditional sources. A study published last year found that “electricity from new wind and solar power is 2.5 to 5 times more expensive than electricity from existing coal and nuclear power.”

Until the cost of green energy declines through technological advances and increases in productivity, transitioning to renewable energy too hastily will necessarily cause energy prices to skyrocket. Rising energy prices disproportionately affect those who already have the hardest time affording energy.

Every additional dollar that lower-income families spend on lighting and heating their homes is a dollar that is now no longer available to pay for housing, food, clothes, and books. By raising energy prices, the Paris Agreement would make it harder for these families to afford the things they need.

 

2. Regulations promulgated under the aegis of the Paris Agreement increase prices and harm the economy.

The Paris Agreement saddles producers with burdensome regulations that increase the cost of doing business. Ultimately, these costs are either passed to consumers or are absorbed by businesses, resulting in lower employment and less investment for the capital goods necessary to produce the goods consumers need.

Furthermore, developed economies like the United States rely on affordable, accessible, and reliable energy. Machines on the assembly line and the trucks transporting goods alike require energy to produce and deliver products to consumers.

Most affected by onerous environmental regulations are energy, manufacturing, and shipping firms. Imagine the mom and pop machining shop that would have to pay tens of thousands of dollars to comply with increased regulations originating from the Paris accord. That’s tens of thousands of dollars that now cannot be used to raise wages for their workers, hire new employees, purchase more inventory, or invest in capital (think: technology and machines) to produce tomorrow’s goods.

In the long run, total production will decrease, employees will make less money in wages and benefits, and consumers will face higher prices at the market. There will be less wealth, less prosperity, and fewer opportunities, especially for those struggling to find jobs or climb the economic ladder.

 

3. The Paris Agreement redistributes wealth from American taxpayers to international corporations and less developed nations.

The Paris Agreement also initiates a massive redistribution of wealth from developed countries to less developed countries. This will be orchestrated through the United Nations Green Climate Fund, which seeks to help developing countries purchase and construct alternative energy infrastructure.

The Green Climate Fund is the worst form of crony capitalism, guaranteed to benefit politically connected firms, especially those that stand to make millions of dollars in selling green energy technology. Like all government infrastructure programs, it will likely be highly inefficient and rife with corruption.

To make matters worse, the Paris Agreement assures that a significant portion of the multibillion dollar budget for the Green Climate Fund will be financed by American taxpayers. Astoundingly, the agreement places American taxpayers on the hook for bankrolling pricey green energy technologies for other nations.

Where do supporters of the agreement think this money will come from? Have they forgotten that the United States is already $20 trillion in debt with unfunded liabilities (promises of future services) totaling over $200 trillion?

Remember that every dollar taxed by government is a dollar that American families and businesses cannot use to purchase the things they need. Taxes divert money and resources from the private sector, where it is spent more efficiently and according to the needs of consumers, to the public sector, where it is spent inefficiently on programs (like green energy) deemed “worthy” by central planners (in this case, the international community) without concern for the needs of the people in these different countries.

The eventual result of increasing taxes will be less capital available to meet the future needs of producers and consumers. There will be fewer total goods produced and fewer jobs. Prices will rise, and families and small businesses will find it harder to get the credit they need for mortgages and small business loans.

 

Decades ago, Henry Hazlitt alerted his contemporaries about the error of ignoring unintended consequences when analyzing policies. His warning still rings true today:

“The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.”

Regardless of the truthfulness of claims made by climate alarmists, it is important to look beyond good intentions to see how policies, like those springing from the Paris Agreement, would affect the most vulnerable people in society in unintended ways. It is tragic that government policies designed to alleviate one problem create further problems that end up harming people.

It is indisputable that the Paris Agreement would have negatively affected lower-income American families. Fortunately for them, the United States is no longer beholden to the agreement, and it can now pursue environmental policies it considers to be in the best interests of Americans.


This article was originally published by the Mises Institute: https://mises.org/blog/withdrawing-paris-agreement-helps-most-vulnerable.

The Bible and Income Inequality

300px-day_3_occupy_wall_street_2011_shankbone_5During the 2016 presidential campaign, Democratic Socialist Bernie Sanders built his platform on the promise of reducing economic inequality. He repeatedly proclaimed his belief that “the issue of wealth and income inequality is the great moral issue of our time.”

While “income inequality” is a favorite rallying cry for socialists everywhere, the Bible doesn’t denounce wealth or material possessions, nor does it indicate that economic inequality is somehow morally wrong.

Many of the Bible’s great men came from considerable wealth. Instead of condemning these men for their affluence, the Bible seems to laud their riches. For example, Abraham “was very rich in livestock, silver, and in gold” (Genesis 13:2, NKJV). Similarly, King Solomon’s treasures were unequaled. After Solomon asked for wisdom and knowledge to rule over Israel rightly, God promised to give him “riches and wealth and honor, such as none of the kings have had who were before you, nor shall any after you have the like” (2 Chronicles 1:12, NKJV). Likewise, before the devastating events of Job’s namesake book unfolded, he was more prosperous than anyone else in the East. Furthermore, God doubled Job’s wealth after his period of tribulation (Job 42:12).

We can use our resources and property for many moral purposes. These moral purposes include providing for our family’s needs (1 Timothy 5:8), investing and saving for the future (Ecclesiastes 11:2; Proverbs 21:20), voluntarily giving to those in need (Hebrews 13:16; Proverbs 21:13), and providing for the work of the church (Proverbs 3:9; Philippians 4:15-18). But it is also morally good for us to use our material possessions for our own enjoyment, offering thanksgiving to God for all He has provided. Paul tells us as much, writing that God “gives us richly all things to enjoy” (1 Timothy 6:17). Yet many people criticize those who live in abundance as if it is morally wrong to have more material things than others.

The Parables of the Minas (Luke 19:11-27) and the Talents (Matthew 25:14-30) serve as relevant biblical case studies. In these parables, a master who is leaving town gives talents or minas (denominations of money) to each of his servants, telling them to “engage in business until I return.” When the master returns, he finds that two of his servants invested his money and made a profit, but one of his servants unwisely refused to invest his money and failed to make a return. The servant who made the greatest return on investment is given the greatest reward, whereas the servant who declined to invest his money has his property taken from him. Through the means of divine providence and the laws of economics, God acts the same as the master in the parable. God has given larger tasks to some people that require many resources, and He has also given smaller tasks to others that need fewer resources. Our responsibility is to be faithful stewards of the resources and opportunities God has given us, trusting in His sovereignty without envying those who have been given more.

What causes inequality? Assuming there is no fraud or theft, inequality results from only three things:

First, inequality often results from some people working more hours than others. King Solomon affirmed this truth: “Whoever works his land will have plenty of bread” (Proverbs 12:11, ESV). Conversely, those who work fewer hours live in less abundance since laziness leads to poverty (Proverbs 6:10-12). Unsurprisingly, a study by the Brookings Institution found that the poverty rate would decrease by 42% if all poor families had one full-time worker earning the same hourly rate he or she makes now.

Second, inequality arises when one person is more productive, and uses resources more efficiently, than another. The person who can produce 50 units per hour will receive a bigger reward than the person who can produce only ten units per hour. Like the servant in the Parable of the Talents who doubled his master’s money through prudent investing and being more productive than the others, those who exhibit greater industry receive a larger reward.

Third, inequality develops when one person produces goods or services that are more highly valued. Engineering and medicine pay more than many other vocations because there is greater demand for engineering and medical services. Using another example, Tony Award-winning actors get paid more money than those working in local musical theaters because society is willing to pay more to watch them perform.

Economic inequality reflects God’s design for the world. Not only has God unequally distributed aptitudes, abilities, and opportunities to men, but he has also structured the laws of economics to reward those who produce goods and services that are highly valued by others, as well as those who use their resources productively and efficiently.

This inequality also provides us with many opportunities to glorify God. Those who have been entrusted with “one talent” can glorify God by faithfully stewarding the resources He has given them, relying upon God’s provision without complaining or envying others who have more. On the other hand, those who have been entrusted with “ten talents” can glorify God by using their resources to build wealth, give generously to the church and the poor, and offer thanksgiving to God for the blessings He has provided.

Contrary to the arguments of Bernie Sanders and others, wealth and income inequality is not “the great moral issue of our time.” Economic inequality reflects God’s design for society, not a moral aberration needing to be eradicated.


This article was originally published by Baptists for Liberty.

Trump’s Student Loan Plan is Bad Economics

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At a campaign stop in Columbus, Ohio, one month before Election Day, Donald Trump shared his plan for addressing voters’ growing concerns about student loan debt.Trump’s student loan repayment plan came late in the campaign cycle, long after Senator Bernie Sanders and Secretary Hillary Clinton released their respective plans, both of which would have increased government intervention in higher education, further distorting the already-convoluted education and student loan markets.

At the time of his speech, Trump’s proposal seemed likely to elicit support from voters, especially among millennials concerned about college affordability and rising levels of student loan debt. From 1980-2014, the cost of attending college rose by nearly 260%. Total student loan debt is nearing $1.25 trillion, and over forty-three percent of former students who borrowed from the federal government are in default, behind on their payments, or aren’t making payments on their federal student loans.

Free market advocates had hoped that Trump’s proposals would constructively tackle the causes of the student loan bubble. Alas, this was not to be. Instead, Trump’s plan bears more similarities to alternative plans released by Obama, Clinton, and Sanders than many conservatives would like to admit.

Called “the most liberal student loan repayment plan since the inception of the federal financial aid program” by The Washington Post, Trump’s proposal would cap repayment at 12.5% of a borrower’s discretionary income. Furthermore, a borrower’s remaining student loan balance would be forgiven after he or she makes their full payments for 15 years. While it’s possible that Trump has considered restoring the pre-2010 system, in which private banks (instead of the government) issue student loans, such loans would still be subsidized and guaranteed by the federal government, eliminating much of the risk that incentivizes banks to engage in prudent and sustainable lending.

Basic economic principles help us predict how Trump’s student loan plan would affect the greater economy and the financial welfare of individuals. At any given time, there exists a limited amount of funds available in capital markets. This capital can be directed toward any number of alternative uses (home loans, car loans, business loans, etc.). But government artificially boosts demand for student loans when it intervenes in the market by enabling student borrowers to repay less than the balance of their loan. This artificial demand for student loans bids capital away from alternative uses, making it more difficult for families and businesses to receive loans for other important purposes.

Moreover, the cost to taxpayers would be steep. The federal government (and, by extension, current and future generations of taxpayers) would be responsible for paying the remaining balance of everyone’s student loan debt after their loans are forgiven. Colleges and universities would grow even richer, receiving billions of dollars as wealth is redistributed from America’s taxpayers to its institutions of higher learning.

Today’s college tuition is so expensive because easy-to-acquire federal student loans have rapidly boosted demand for higher education. Unless supply keeps pace with demand, prices will inevitably rise. Millions of students have become burdened with previously unimaginable levels of student loan debt needed to finance schooling that has been made artificially expensive by government intervention.

If Trump had been sincerely concerned about college affordability and the soon-to-burst student loan bubble, his plan would have eliminated the federal student loan system entirely. As Jason Morgan predicted in his recent article for Mises Wire, “Without the artificial demand generated through taxpayer-funded subsidies, universities [would] be forced to lower their tuition prices to meet what students and their families are able and willing to pay. This new reality [would] force higher education institutions to adapt to the needs of students.”

Instead of addressing the underlying cause of the problem (namely, the inflated cost of education resulting from federal education subsidies), Trump’s proposal attempts to mitigate the regrettable effects of government’s intervention into the student loan market by forgiving the debt of millions of working professionals.

While Trump’s proposal might score him political points among millennials saddled with an excessive volume of student loan debt, it certainly doesn’t make good economic sense. We might momentarily feel better if our student loan payments are reduced and our balances are forgiven, but we will all be poorer because of it.


This article was originally published by The Mises Institute: https://mises.org/blog/trumps-student-loan-plan-treats-symptoms-not-disease.

A Biblical Approach to Government Debt

us_capitol_buildingIn God’s covenant with Israel, he commanded the ancient nation to abstain from incurring debt. “For the Lord your God will bless you just as He promised you; you shall lend to many nations, but you shall not borrow; you shall reign over many nations, but they shall not reign over you” (Deuteronomy 15:6, NKJV). If Israel obeyed the law of God, they would be blessed. Conversely, if they diverged from the path revealed to them, they would face judgments, among which included the loss of sovereignty that results from the burden and obligations of indebtedness: “The alien who is among you shall rise higher and higher above you, and you shall come down lower and lower. He shall lend to you, but you shall not lend to him; he shall be the head, and you shall be the tail” (Deuteronomy 28:43-44, NKJV).

Over 3,400 years after the covenant renewal recorded by Moses in Deuteronomy, the United States of America faces one of the greatest threats to its future. America’s national debt currently exceeds $19,000,000,000,000. Since President Obama assumed office in 2009, the national debt has nearly doubled. Not counting state and local debts, interest payments, and the estimated $120 trillion in unfunded liabilities – namely, Social Security, Medicare, and federal employee and veterans’ benefits – every American family of four owes approximately $250,000 to America’s creditors.

Proverbs 22:7 says, “The rich ruleth over the poor, and the borrower is servant [other translations use ‘slave’] to the lender” (KJV). Writing about this verse, the renowned seventeenth century biblical commentator Matthew Henry astutely observed, “Some sell their liberty to gratify their luxury.” Creditors, using their liberality as leverage, often place onerous demands on their debtors. Additionally, those who are laden with debt must repay their loans before they can provide for their own needs. Nations that become burdened with debt lose their financial freedom and self-determination.

Our nation’s founding fathers held a deep understanding of this biblical truth. Thomas Jefferson, believing that “the laws of the Creator” prohibited every generation from leaving its debt to be repaid by the next, wrote to his friend John Taylor, “[T]he principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

We are, in effect, borrowing money on behalf of future generations, thereby robbing them of their future earnings. No loving, reasonable parents would open a credit card in their son or daughter’s name, spend until they hit the credit limit, and then stick their child with the bill. Yet that is precisely the generational theft that Americans are perpetrating against their posterity. To finance their unprecedented appetite for government services, the American public is stealing from the prosperity of future generations.

Every American child is born into this world already owing $60,000 to our nation’s creditors. These children never consented to the bill we are leaving them. Nevertheless, they will be metaphorical slaves, laboring not for their own needs, but rather to repay the debts of their ancestors.

Instead of raising taxes when the people’s appetite for government services exceeds tax revenue, governments incur debt.  At some point in the future, taxpayers must repay the debt plus interest. There are only two means of reducing debt: raise taxes or significantly cut spending and use the savings to pay down the debt.

Which of these is the most effective method of reducing debt? The Laffer Curve, which refers to an economic phenomenon popularized by economist Arthur Laffer, explains the relationship between tax rates and tax revenues. Most people falsely assume that governments raise more tax revenue by increasing tax rates. However, the opposite is often true. Governments often obtain higher tax revenues by lowering tax rates. When taxes are high, there is less incentive to work and invest; people either decide to work less, or they engage in tax avoidance or evasion, to avoid paying confiscatory tax rates. The Laffer Curve explains why tax revenues soared following each of the Kennedy, Reagan, and Bush tax cuts. Increasing taxes will not bring about the desired result. Therefore, it is clear that we must make considerable cuts to the national budget, implement meaningful reforms to reduce unfunded liabilities, and get serious about paying off the national debt.

Experience shows us that we embark on the road to poverty and ruin when we disregard the biblical principles of economics. Worse yet, we doom our children to a lower standard of living than we enjoyed. It is time for us to elect leaders that will begin to reverse our country’s decades-long unbiblical practice of incurring increasingly more debt.

This column was originally published in the June/July 2016 issue of the Baptists for Liberty Newsletter: http://baptistsforliberty.weebly.com/uploads/1/1/9/8/11989443/bfl-june_and_july_2016.pdf.

Delaying Marriage Hurts Men and Families

Two Platinum or Silver Rings - Reflected CandlesNot only are married men healthier and happier than their single peers, but statistics show they are also more financially successful.

“Becoming a husband means growing up, making a transition from prolonged semi-adolescence to true male adulthood,” says Robert Rector, Senior Research Fellow in Domestic Policy Studies at the Heritage Foundation.

Holding other variables constant, men earn 0.9 percent higher wages for each year they are married. After being married for ten years, husbands earn 17 to 20 percent more than unmarried peers with the same characteristics.

These statistics reveal an economic phenomenon that economists have termed the marriage premium. Entering into marriage seems to cause men to be more productive and receive higher earnings, after controlling for variables such as the unemployment rate, age, race/ethnicity, education, and mother’s characteristics.

Men who delay or forgo marriage lose out on the marriage premium. For each year that a man resists tying the knot, he falls further behind his married peers professionally and financially, sacrificing the significant bump in wages and productivity that he would have otherwise received.

The effect of the marriage premium on a man’s financial condition becomes more pronounced over time. After decades of receiving the 0.9 percent annual increase in wages that is caused by entering into marriage, married men are often making tens of thousands of dollars more per year than their single peers.

Even less-educated men benefit from the marriage premium. The marriage premium among married men with a high school diploma or less is at least $17,000. This helps substantiate conclusions from a Brookings Institution study that indicate getting married is more effective in preventing and reducing poverty than getting more education.

Many millennials want to wed but are delaying marriage until they have achieved financial security. However, the marriage premium phenomenon seems to indicate that marriage allows for the financial security millennials are seeking.

Marriage also has a strong effect upon poverty. A 2003 study released by the Brookings Institution found that the poverty rate would be reduced from 13 to 9.5 percent if the marriage rate among families had remained unchanged from 1970 to 2001.

Why does the marriage premium exist? Married men are healthier and happier. They tend to live more stable lives, move less often, and demonstrate more responsibility. Their wives provide them with emotional support and professional advice, as well as support around the house. All of these characteristics make for better employees that are more productive at work and highly valued by employers.

Those who promote the idea that young adults should pursue financial stability before getting married increase the likelihood of poverty and make it more difficult for men to achieve financial success. The marriage rate among millennials is significantly lower than previous generations, and fewer young adults are getting married than ever before. As long as this trend continues, men will continue to suffer from missing out on the marriage premium.

Men do better when culture promotes marriage. Families are more resilient when men are healthy, happy, and professionally successful – and marriage is the ideal first step.

This post was originally written for the Family Policy Institute of Washington: http://www.fpiw.org/blog/2016/06/13/statistics-show-delaying-marriage-hurts-families-incomes/.

A Biblical Approach to the Minimum Wage: The Parable of the Workers in the Vineyard and Liberty of Contract

strike_and_a_protest_march_for_a_15_minimum_wage_in_dinkytownWe have watched the scene repeatedly shown on our favorite cable news shows. Across the country, fast food employees are engaging in strikes, protests, and other forms of civil disobedience, demanding that the federal minimum wage be raised to $15 per hour. Cities like Seattle and Los Angeles, and states like California and New York, have capitulated to the protestors’ demands, enacting legislation that requires drastic increases to the minimum wage.

Basic economics teaches us that far from reducing poverty or helping the plight of the working poor, in reality, raising the minimum wage actually makes it more difficult for poor people to find sustainable employment. Raising the minimum wage increases the supply of labor and reduces its demand, creating a surplus of individuals looking for work and a shortage of businesses looking to hire. Low skilled workers are disproportionately harmed by a high minimum wage because they lack the marketable skills and work experience that justify higher wages. Their jobs may be transferred to salaried employees, replaced by automation, done by the business owners themselves, or left undone. Additionally, poor individuals must pay the higher prices for goods and services necessitated by increased labor costs.

Economists are now able to utilize complex econometric computer models to quantify the economic effects of changes in public policies. One such study, published by the Heritage Foundation, found that raising the minimum wage to $15 an hour would reduce fast food profits by 77%, reduce fast food sales by 36%, and would force fast food restaurants to raise prices by 38% and cut employee hours by 36%. Another study, published by the American Enterprise Institute, used data from the Bureau of Labor Statistics to demonstrate that unemployment in Seattle increased 1.2% during the nine months that followed the city-wide minimum wage increase from $9.32 to $10 an hour in 2015. Imagine the effect on Seattle’s unemployment rate when the minimum wage is raised to $15 per hour for larger businesses in 2017 as mandated by the law recently passed by the city council.

As Christians, we bear the responsibility of faithfully applying biblical principles to all areas of life, including economics. Through a combination of carefully studying the Scriptures and prudently observing economic phenomena, we can derive economic principles rooted in biblical truth and the reality of economic science.

The Parable of the Workers in the Vineyard, found in Matthew 20:1-16, records a parable told by Jesus to his disciples. Proper exegesis requires that we first determine what Jesus’s purpose was in telling the parable. It is from this parable that we glean the spiritual principle of “the last shall be first, and the first last” (Matthew 20:16). No matter how long we individually labor for the Kingdom of God, God’s grace is such that we will all enjoy blessings of Heaven and eternal life with Him.

Behind every parable is both a spiritual and earthly principle. Parables use earthly stories that contain self-evident truisms to communicate spiritual truths. The Parable of the Lost Coin (Luke 15:8-10), for example, uses the self-evident truism that we search after lost things that are valuable, and rejoice when we find what we have lost, to elucidate why Jesus seeks His lost sheep and angels rejoice in Heaven when sinners repent. Just like the woman seeks after her lost coin, Jesus pursues lost sinners, and all of Heaven rejoices when they are found.

What is the self-evident and earthly truism utilized by Jesus in the Parable of the Workers in the Vineyard? In the parable, a group of laborers confront the vineyard owner at the end of their workday, claiming that it is unfair that they would make the same wages as those who worked for less time. The owner replies, “Friend, I am doing you no wrong. Did you not agree to work for me for a denarius [a Roman silver coin]? Take what is yours and go your way. I wish to give to this last man the same as you. Is it not lawful for me to do what I wish with my own things? (Matthew 20:13-15, NKJV).

By using this example, it is clear that Jesus assumed that employers were free to offer whatever wages they wished. Similarly, employees are free to agree to certain wages; if they don’t feel that the wages being offered are reasonable, they can reject the employer’s offer. This is called liberty of contract, which allows for employers and employees to voluntarily assent to the terms of the exchange of labor and wages. As humans created in the image of God, we are endowed with the ability to decide with whom we contract and the terms of that contract, much as God reserves for Himself the agency to decide with whom He covenants.

Minimum wage laws violate this biblical principle by interfering in the employee/employer relationship. Employees and employers are stripped of their constitutionally protected liberty of contract when the federal government suspends the laws of economics by instituting a wage floor. The employer and employee cannot contract to exchange labor for wages under the minimum wage, even if both parties find the exchange mutually beneficial according to their own self-interest.

Employers are accountable to God in that they pay their employees fair wages in a timely fashion. “Behold, the hire of the labourers who have reaped down your fields, which is of you kept back by fraud, crieth: and the cries of them which have reaped are entered into the ears of the Lord of Sabbath” (James 5:4).  We can safely assume that government does have a legitimate obligation to penalize fraud in the workplace when wages are withheld from employees.

Like their employers, employees are equally accountable to God in that they abstain from laziness, dishonesty, and theft of time. John the Baptist also told the Roman soldiers to “be content with your wages” (Luke 3:14). When both parties faithfully uphold their moral responsibilities, God is glorified.

Minimum wage laws strip us of our liberty of contract, which was given to us by our Creator and allows us to glorify Him. These laws also hurt the poor, which are the very people that minimum wage advocates claim they want to help. Next time someone recommends increasing the minimum wage as a way to help the working poor, share with them the economic consequences of doing so, as well as the biblical principle of liberty of contract.

 

This post was originally published in Issue #35 of the Baptists for Liberty newsletter: http://baptistsforliberty.weebly.com/uploads/1/1/9/8/11989443/issue35-aprilmay2016.pdf.