Economics 101 & Public Square & Theology 101

The Economics of Income, Part Two

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Last week I introduced how salaries emerge within the context of a market economy. I want to expand on this idea today.

First, though, let’s review some basics about salary and income:

  • The salary you receive is the price for your labor.
  • Prices in markets work very well as signaling devices. They induce people to produce more or less of a good or service based on the demands of consumers.
  • Prices reflect relative scarcities of goods and services.

But how do these basics play out in real life?

The Economics of Income – In Real Life

My mom is a retired nurse. For roughly the last decade of her career, there was a nursing shortage in the country. The relative salaries for nurses increased over that time. That salary increase was a market signal being sent to potential suppliers of nursing, telling them that their services were needed.

When these shortages eventually go away, relative salaries can be expected to level out. That is the market’s way of telling us that we have “enough” providers of nursing services for the moment.

Two things are important to remember here:

  • Markets are dynamic: change is the most important aspect of markets. We never stay at the status quo for long.
  • Salary & value aren’t always the same: none of these salary changes reflect the value of the person in God’s eyes.

The last bullet point leads us to some biblical principles underlying how we can start to reshape our view of income.

Different Gifts, Different Salaries

Markets are capable of rewarding or punishing only in terms of profits and losses, i.e., in monetary terms.

That one person makes a seven-figure salary and another makes a five-figure salary has nothing to do with their intrinsic value or dignity. Nor does it reflect how God feels about them.

The biblical principle behind all of this is that we are created uniquely and differently. God created us in his image. We are distinct and special, but we are not all five-talent people.

Reflecting back on the Parable of the Talents, notice that the master gave to each servant a specific amount to steward, according to their ability. Matthew 25: 14-15 says,

Again, it will be like a man going on a journey, who called his servants and entrusted his wealth to them. To one he gave five bags of gold, to another two bags, and to another one bag, each according to his ability. Then he went on his journey.

There is explicit recognition in this passage that we have different abilities, different gifts and talents. We are all equally loved by God, but we are not equally gifted.

In a market economy, some will be rewarded much more than others for how they apply their talents and gifts to the needs and wants of consumers.

This in no way means that if you make a five-figure salary, you are not doing important work. In a market, if the work you did was irrelevant, you wouldn’t make a salary at all. Again, the market is not an indicator of the transcendent value of the work being done.

Salaries and Realities

This can help us better understand why some make much more than others.

Nurses and teachers are required to have compassion, diligence, and integrity in their work. Nurses help save lives and teachers help mold young minds. These are certainly important jobs.

What is most important here, rather than the salary differential between doctors and nurses, is that if the work you are doing is what God has called you to do, given the talents and skills he created you with, then that work is an opportunity to serve him and to contribute to the Kingdom of Christ in ways that you may never fully understand.

In our modern society there is so much pressure to have more stuff, which means we need to earn more money. This brings to light salary differentials and the desire to want more or work in a profession that pays more, but if God hasn’t gifted you for it and called you to it, you will be missing out on the joy that work can bring.

My prayer is that we seek God to better understand what he has called us to in this life, how we can change the world, regardless of the salary it brings.

What do you think? What other questions do you have about salary, income, and value? Leave your comments here

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