Policy #4: Minimum Wage: Justice or Oppression?

Price controls, such as minimum wage, rent controls, etc., are not permitted. It is ultimately the state's responsibility, not business, to ensure that the people can address their basic needs. 

In Ontario, Canada, the premier recently announced a plan to raise minimum wage to $15 an hour. The policy announcement was celebrated by labour activists

A recent debate on CBC, captured the arguments for and against the increase in the minimum wage.  The pro-minimum wage side of the debate noted that higher wages will enable people to afford the basics of life. Futhermore, the additional spending will boost the economy as workers will have more to spend. While, the anti-minimum wage side of the debate, sees this as a negative policy as it will cause businesses to raise prices, reduce staff or even shut down as they can no longer afford to run their business due to high costs. 

Islam & price controls

The past few policies we've explored, such as prohibition of interest or the illegality of stocks, propose solutions that curtail the wealth of the 1%. 

Some may say such a perspective conforms to the "left". However, this is not true. Islam is neither right wing or left wing, but rather a system based on the Quran and the Sunnah of our beloved Messenger (saw). Keeping this in mind  Prophet Muhammad (saw) refused to introduce price controls during a time of price inflation:

Anas reported: “Prices soared during the time of the Messenger of Allah (saw) so they said to him; ‘O Messenger of Allah why don’t you introduce pricing?’ He said; ‘Verily Allah is the Recipient, the Extender of wealth, the Provider, and the Pricer, and I hope that I will meet Allah (swt) without having anyone accusing me of having perpetrated a Mazlema (oppression) against him be it in blood or in money.’” [Ahmad]

Consequently, the ruler can't impose price controls, including on things that on the surface seem to help the poor. This includes actual price controls themselves (Canada imposed them in mid-70s; my dad never forgave PM Pierre Trudeau for this) as well as imposing a minimum wage that businesses must pay to its workers. As the hadith states, when the state does such a thing it is an oppression (mazlema) against the merchants. 

Why the minimum wage? 

Though the Islamic position is clear on this, we should use it as an opportunity to understand where the minimum wage concept comes from within the Capitalist system.

What the minimum wage debate highlights, is actually a central defect in the Capitalism which leave the price as the distribution mechanism for wealth. It is primarily through the wage that the 99% accesses the means to provide for themselves. Consequently, if one can't earn enough to live than according to orthodox Capitalist doctrine they are free to die

This is wrong: being human is sufficient to warrant access to the means to life.  Prophet Muhammad (saw) said:

"The Son of Adam has no better right than that he would have a house wherein he may live, a piece of clothing whereby he may hide his nakedness and a piece of bread and some water." [Tirmidhi]

Capitalist companies will do their best to pay the lowest wages in order to maximize profits for the owners. However, if they go too far then there will unrest. For example, in 1877 there was a massive Railway strike across America to protest the poor wages and working conditions.  To avoid such a situation (which could result in mass rebellion against the system) the minimum wage is a compromise solution: it maintains price as the distribution mechanism, but forces companies to pay enough to cover basic needs of the people.  The latter ensures the roots of rebellion are quelled. 

who protects the poor?

In Islam, it is ultimately the State that is responsible to ensure that employees have their rights met. Also, all citizens (based on the hadith above) have the right to ask the State for the basic needs.

The State, however, doesn't necessarily have to give  hand outs.  

In the following narration Prophet Muhammad (saw) helped a man to start his own business:

“A man of the Ansar came to the Prophet  (saw) and begged from him. He (the Prophet) asked: Have you nothing in your house? He replied: Yes, a piece of cloth, a part of which we wear and a part of which we spread (on the ground), and a wooden bowl from which we drink water. He said: Bring them to me. He then brought these articles to him and he (the Prophet) took them in his hands and asked: Who will buy these? A man said: I shall buy them for one Dirham. He said twice or thrice: Who will offer more than one Dirham? A man said: I shall buy them for two Dirhams. He gave these to him and took the two Dirhams and, giving them to the Ansari, he said: Buy food with one of them and hand it to your family, and buy an axe and bring it to me. He then brought it to him. The Messenger of Allah (saw) fixed a handle on it with his own hands and said: Go, gather firewood and sell it, and do not let me see you for a fortnight. The man went away and gathered firewood and sold it. When he had earned ten Dirhams, he came to him and bought a garment with some of them and food with the others. The Messenger of Allah (saw) then said: This is better for you than that begging should come as a spot on your face on the Day of Judgment. Begging is right only for three people: one who is in grinding poverty, one who is seriously in debt, or one who is responsible for compensation and finds it difficult to pay.” 

This is a good illustration of how Islam encourages entrepreneurship as a means to alleviate poverty. Prophet Muhammad (saw), who is the head of State, worked collaboratively to help the Ansari in the following ways:

  • Raise capital: through the sale of his assets, he got both seed capital to invest in his business as well providing the income he needed.
  • Assist the business:  Prophet (saw) assisted by fixing the axe so it could be used for cutting wood. In today's context the State could invest or find other ways to help the business operate.   
  • Assist with strategic/business planning: Prophet (saw) effectively gave the Ansari a business plan to execute, i.e. selling the wood.  Keep in mind that consulting companies make billions doing this type of work today.   

The approach Prophet Muhammad (saw) took with the impoverished individual is but one of the many policies in Islam that address the issue of poverty - without imposing price controls (minimum wage or otherwise) on businesses.