I.1.1. Initial Question of Helping Workers

 The inquiry did not arise from opposition to business enterprise, hostility toward markets, or dissatisfaction with profit-making itself. The inquiry emerged after decades of working with real businesses, real business owners, real workers, and real economic constraints. During those years, the practical application of capitalist principles often produced successful outcomes. At other times, those same forces produced difficult consequences for business owners, workers, and communities that found themselves on the unfavorable side of economic change, competitive pressures, business failures, industry disruptions, or other market forces.

Years of working with businesses also revealed that economic vulnerability is not confined to workers alone. A business owner who spends years building an enterprise and ultimately loses the business may experience many of the same practical consequences faced by a worker who loses employment, including loss of income, loss of economic security, uncertainty about the future, and disruption of family expectations. Although the legal and economic positions of owners and workers differ in important respects, both may find themselves adversely affected by economic forces beyond their control. This observation reinforced the view that the inquiry should focus less upon economic labels and more upon the practical consequences experienced by human beings participating in enterprise life.

Those experiences did not lead to the conclusion that enterprise should be abandoned. Nor did they lead to the conclusion that markets should be eliminated. Instead, those experiences generated a practical question: could enterprise institutions be structured in ways that produced better outcomes for workers while preserving the productive features that made enterprise successful? The inquiry that ultimately became Commons Capitalism^[1] emerged from the effort to answer that question.

The inquiry that ultimately led to Commons Capitalism began with concern for worker well-being. Workers perform the ordinary activities upon which enterprises, families, communities, and societies depend. Accordingly, the condition of workers cannot be regarded solely as a private matter affecting individual workers. Worker well-being affects workforce development, economic participation, family formation, enterprise continuity, and broader social stability.[1001]

The existence of worker well-being concerns does not establish that workers are victims, that businesses are acting improperly, or that markets have failed. The initial question is simply whether worker well-being may be improved through institutional design. If worker well-being is an important social objective, it becomes reasonable to ask whether enterprise institutions may be structured in ways that better support worker well-being while continuing to operate successfully within competitive markets.[1002]

One possible reason for asking that question is that existing compensation systems often focus upon labor-market outcomes rather than worker well-being itself. Market wages ordinarily reflect labor supply, labor demand, bargaining conditions, productivity, skills, and competitive forces. Those mechanisms answer the question of what employers must pay to obtain labor. They do not necessarily answer the different question of what level of compensation and benefits best promotes worker well-being.[1003]

The inquiry therefore began to distinguish between market compensation and worker well-being. Premium wages and stronger social benefits emerged as the most direct areas for examination because compensation and benefits are the principal mechanisms through which enterprise institutions affect worker well-being.[1004]

The inquiry also required an objective standard rather than individualized compensation based upon personal circumstances. Workers performing comparable work should not receive different compensation because of age, sex, marital status, parental status, household composition, spouse’s income, or other personal characteristics. Instead, the inquiry focused upon whether compensation and benefits were reasonably sufficient, under the relevant economic, geographic, industry, and enterprise circumstances, to support the ordinary conditions associated with worker well-being.[1005]

However, the maximum amount of wages and benefits that may be provided to workers is constrained by available resources, enterprise continuity, competitive conditions, reinvestment needs, reserve requirements, and long-term sustainability. The inquiry does not assume that worker compensation and benefits should be maximized without limit, or that every improvement in worker well-being can be achieved immediately. The inquiry instead asks how far worker well-being can be advanced within the practical limits under which enterprises must operate.[1006]

I.1.1.1. What the Inquiry Does Not Assume

 The inquiry does not assume that workers are underpaid in a legal, contractual, or market sense. A worker may receive the wage the labor market permits and the wage the worker voluntarily agrees to accept.[1007]

The inquiry does not assume that employers act improperly by paying market wages. Employers ordinarily operate within compensation structures shaped by labor markets, competitive conditions, business requirements, and applicable law.[1008]

The inquiry does not assume that workers are entitled to any particular wage level or benefit package independent of the practical realities of enterprise operations.

I.1.2. Premium Wages as Primary Purpose

Once the inquiry focused upon worker well-being, compensation emerged as one of the most important areas for examination. Compensation influences housing opportunities, economic security, savings capacity, educational opportunities, retirement preparation, resilience against unexpected economic disruptions, and the ability to participate meaningfully in economic life.[1009]

At an early stage, the inquiry recognized that market wages and worker well-being are not identical concepts. Market wages answer what employers must pay to attract and retain labor. They do not necessarily answer what level of compensation best promotes worker well-being.[1010]

This distinction led to a further question. If enterprise resources permit, why should compensation be limited to the minimum amount necessary to attract and retain workers? If worker well-being is an important objective, it becomes reasonable to ask whether workers may receive compensation materially above ordinary market levels while preserving enterprise continuity, competitiveness, and long-term sustainability.

Accordingly, premium wages emerged as one of the primary purposes of the inquiry. Premium wages did not arise as a later consequence of Commons Capitalism. Premium wages were among the original objectives that motivated the search for an institutional structure capable of producing them.

The amount of compensation that may be provided to workers remains constrained by available resources, enterprise continuity, competitive conditions, reinvestment needs, reserve requirements, and long-term sustainability.[1011] Premium wages therefore function as a primary objective rather than an unlimited objective.

I.1.2.1. Objection: Workers Receive the Wage They Bargained For

 A common objection is that workers receive the wage they bargain for and the wage the labor market will bear. Under this view, a worker who voluntarily accepts employment at a particular wage cannot properly claim entitlement to higher compensation merely because higher compensation would be desirable.

The Commons Capitalism response is that the objection addresses a different question. The objection explains why a worker may be receiving the market wage. The inquiry asks whether a different enterprise structure can provide materially higher wages through a different approach to the governance and deployment of enterprise surplus.

The Fair Labor Standards Act is relevant not because it requires premium wages, but because Congress recognized that worker compensation implicates broader concerns relating to health, efficiency, and general well-being. The existence of a market wage therefore does not necessarily end the inquiry into worker compensation.[1012]

I.1.3. Stronger Social Benefits as Primary Purpose

 As the inquiry progressed, it became apparent that compensation alone could not fully address worker well-being. The inquiry also recognized that worker well-being cannot be reduced to the maintenance of labor productivity alone. Workers are not merely productive inputs whose compensation and benefits should be evaluated solely by reference to their ability to continue working. A compensation system that provides only those wages and benefits necessary to maintain labor productivity may answer the needs of enterprise operations, but it does not necessarily answer the broader question of worker well-being.[1013]

Workers experience illness, disability, aging, family responsibilities, educational needs, economic uncertainty, and retirement. Accordingly, the inquiry considered whether enterprise institutions should evaluate worker well-being by a broader standard than the minimum conditions necessary to maintain productive labor. Stronger social benefits emerged in part from the recognition that workers participate in enterprise life as human beings rather than merely as units of labor.[1014]

The inquiry therefore expanded beyond compensation alone. Stronger social benefits became a separate and independent objective because social benefits may address categories of risk that wages alone cannot efficiently address. The objective was not merely to increase worker income. The objective was to improve the overall condition of workers by addressing both compensation and economic vulnerability.

The inquiry does not assume that social benefits should be expanded without limit. Social benefits remain subject to the same practical constraints that affect compensation, including available resources, enterprise continuity, competitive conditions, reserve requirements, and long-term sustainability.[1015]

[1001] International Labour Organization, Declaration concerning the Aims and Purposes of the International Labour Organisation (Declaration of Philadelphia), May 10, 1944, secs. I(c), II(a), III(a)–(b), IV.

[1002] International Labour Organization, Declaration of Philadelphia, sec. II(a); Universal Declaration of Human Rights, G.A. Res. 217A (III), U.N. Doc. A/810, art. 22 (Dec. 10, 1948).

[1003] Fair Labor Standards Act of 1938 § 2(a), 29 U.S.C. § 202(a); U.S. Department of Labor, Wage and Hour Division, “Wages and the Fair Labor Standards Act.”

[1004] International Covenant on Economic, Social and Cultural Rights, opened for signature Dec. 16, 1966, 993 U.N.T.S. 3, art. 7.

[1005] Universal Declaration of Human Rights, art. 23(2); International Covenant on Economic, Social and Cultural Rights, art. 7(a)(i).

[1006] International Labour Organization, “Sustainable Enterprises”; International Labour Organization, “ILO Department of Sustainable Enterprises, Productivity and Just Transition (ENTERPRISES).”

[1007] OpenStax, Principles of Economics 2e, § 4.1, “Demand and Supply at Work in Labor Markets.”

[1008] Fair Labor Standards Act of 1938, 29 U.S.C. §§ 206(a), 207(a)(1).

[1009] Universal Declaration of Human Rights, art. 23(3); International Covenant on Economic, Social and Cultural Rights, art. 7(a)(ii).

[1010] Sandrine Cazes, Alexander Hijzen, and Anne Saint-Martin, “Measuring and Assessing Job Quality: The OECD Job Quality Framework,” OECD Social, Employment and Migration Working Papers, no. 174 (Paris: OECD Publishing, 2015), doi:10.1787/5jrp02kjw1mr-en.

[1011] International Labour Organization, Conclusions concerning the Promotion of Sustainable Enterprises, International Labour Conference, 96th Session, Geneva, 2007; International Labour Organization, “Sustainable Enterprises.”

[1012] Fair Labor Standards Act of 1938, 29 U.S.C. § 202(a); Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 740 (1981).

[1013] Joan Robinson, Economic Philosophy (Harmondsworth: Penguin Books, 1964; first published 1962), 46.

[1014] Universal Declaration of Human Rights, arts. 22–25; International Covenant on Economic, Social and Cultural Rights, arts. 7, 9.

[1015] International Labour Organization, “Sustainable Enterprises”; International Labour Organization, “ILO Department of Sustainable Enterprises, Productivity and Just Transition (ENTERPRISES).”