Since the early 20th century, this has become an area of great confusion. Increasingly modern man has come to see civil life as a sort of substitute for the church, which is a minister of the grace of God. As the modern and late-modern West has rejected Christianity it has lost the sense of limits of government. We have come to think of it as a minister of grace, whereby it gives to others what is not theirs by right. This is the essence of the modern welfare state and the modern utopian eschatology that says that if only the right technicians are empowered, all social ills can be erased and a new heavens and a new earth brought about. We have come to think of government as something that can make men good when its only real natural function is to restrain and punish the evil we do to each other.

It is vital for Christians to understand that, for their standing with God (justification) and their gracious and gradual conformity to Christ (sanctification), i.e., for their salvation from the wrath to come and their deliverance from the bondage of sin, they are in a covenant of grace. It is not possible for a believer to be under a covenant of grace for salvation and under a covenant of works for salvation. Nevertheless, there are ways in which all humans, Christians and non-Christians are under different kinds of covenants of works. All unbelievers remain under the demands of the covenant of works: do this and live (Luke 11:28). The law continues to demand perfect obedience and the righteousness of God demands satisfaction for sins committed. Yahweh is angry with the wicked every day (Ps 7:11; AV). Either one accepts Jesus as one’s substitute, with his satisfaction and righteousness or one is obligated to provide one’s own—a mark that no sinner can hit.

There are penultimate (one step removed from final) ways, however, in which all of us are under  covenants of works. One of the great mistakes made both by the religious left and the religious right in the USA is to attempt to turn our civil life into a covenant of grace. Based on my experience both as an employee and as an employer I am reasonably sure that it is not widely understood among Christians that work (despite the fact that it is called work) is a covenant of works and not a covenant of grace.

In a covenant of grace, sinners are given what they could not earn and what did not deserve. By definition, grace or divine favor, is merited for elect sinners by Christ, shown to them, and given to them freely. Works, however, is another principle. Under the works principle, as Paul says, a wages paid to a worker are not a gift but his due (Rom 4:4). Again, sinners are saved on the basis of Christ’s works for them, credited to them. So the benefits of Christ’s works received through faith alone (sola fide) is a matter of grace.

The works principle, however, does operate in common, secular life. Paul twice invokes this principle. In 1 Corinthians 3:7 he says, “each will receive his wages according to his labor” and in 1 Timothy 5:18 he invokes Deuteronomy 25:4, “You shall not muzzle an ox when it treads out the grain,” as the basis for his inference “The laborer deserves his wages” (which is a quotation of our Lord’s teaching in Matthew 10:10).

The works principle continues to operate in daily life. It operates with one’s daily labor. The employee owes his employer a fair day’s work for his wages. Paul even says, “If anyone is not willing to work, let him not eat” (2 Thess 5:10). Daily labor is a covenant of works. In school, term papers and exams are expressions of the works principle. Teachers set a reasonable standard and mark papers and exams accordingly. As I often tell my students: I flunk no one. I simply recognize what students have accomplished. My work as a teacher does not create reality. It simply recognizes what is. Our civil life is a covenant of works. We live together in a secular civil polity according to an explicit works principle. We must obey the law. The day we speed we should expect a ticket. The day we steal, we should expect to be arrested, charged, tried, convicted, and sentenced. We live with our neighbors on the basis of works. We elect representatives, senators to create laws and presidents to execute faithfully those laws. We expect judges to interpret laws and to apply them to particular civil and criminal cases. The vocation of these offices is to deal in laws and righteousness, not grace. Even international relations is a covenant of works. The USA relates to other nations not on the principle of grace, but works. Every treaty says, in effect, “do this and live.”

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