
When Henry Ford Doubled His Minimum Wage (2014) - how-about-this
https://www.saturdayeveningpost.com/2014/01/ford-doubles-minimum-wage/
======
bmmayer1
I can't believe this actually needs to be said, but a single employer raising
its wages is not the same thing as a government raising a legally mandated
minimum wage. It's so much not the same thing, that the very fact the article
tries to conflate them by comparing Ford's decision with the proposal from the
Obama administration makes me doubt the voracity of the entire piece.

For one thing, Ford's logic is quite sound precisely because he's the only one
raising wages. If his aim is to remain competitive and retain workers, that
only works if he's the only one doing it -- competition, by definition, is
relative.

Furthermore, the idea that people become richer because the number on the
bottom of their check goes up, rather than the buying power of that number, is
easily debunked by looking at the entire history of inflation. I'm easily
making more money, in nominal dollars, than an average CEO in 1919, but I'm
not running wild in Saint-Tropez every summer either.

The one thing the article does get right is Ford's attempt to fight the stock
market crash in 1929 by raising wages further backfiring. The reason is
because his higher wages were not the actual reason why Detroit was richer --
the opposite was true: he was able to pay higher wages because Detroit was
richer; or, more precisely, because he made the best cars in the world and
capital flowed into his company and his city at high rates. But when the
economy contracted, Detroit was going to feel the pinch, also.

Nothing in this article makes a case for raising a federally mandated minimum
wage, and actually undermines the argument quite a bit.

~~~
dreamache
100% agree. In Ford's case, it was a voluntary decision to attract and keep
the best workers. In the case of federally mandated minimum wage, it's a
threat of force against business owners who are otherwise acting peacefully
and quite literally, minding their own business.

Raising the minimum wage results in: \- A raise in the price of products
(hurting the poor the most) \- Firing employees \- Reducing hours \- Going out
of business \- Outsourcing

I'm a business owner, and I'm not going to sit here eating up the cost of a
higher minimum wage. The central planners don't seem to understand this -- or
they do, and they ultimately want more people dependent on them. If that's the
case, raising the minimum wage is a great idea.

~~~
jimmaswell
As you must know being a business owner, labor is only one component of
expenses, so prices don't go up x% just because labor went up x%. In
McDonald's case, a 100+% rise in wages would represent a 4% rise in price.
Obviously most minimum wage increases don't double at once so it would be even
less. You don't go on a firing spree and shut down the business when property
taxes or materials go up so why would you need to do that if labor went up?

[https://www.marketwatch.com/story/raising-fast-food-
hourly-w...](https://www.marketwatch.com/story/raising-fast-food-hourly-wages-
to-15-would-raise-prices-by-4-study-finds-2015-07-28)

There would be no need for a minimum wage if we had UBI but that kind of thing
is too far off.

~~~
Consultant32452
The production cost of a McBurger may only go up 4%, but the consumer price of
goods is also significantly dependant on how much money is in consumer's
hands. If you just hand everyone in the country $500/mo, rent is going up
everywhere.

~~~
jimmaswell
Only <4% of people make the federal minimum wage. Couldn't find stats on state
minimum wage earners but it's still probably not so much that rent would be
hugely impacted.

Not to mention, rent control is a good idea in addition, or finding ways to
make homeownership more in-reach for more people.

~~~
Consultant32452
Rent wasn't intended to mean literally just rent. You'd need price controls on
everything, which is historically a terrible idea.

------
chiefalchemist
"Higher wages were necessary, Ford realized, to retain workers who could
handle the pressure and the monotony of his assembly line."

This sentiment and empathy seems to be lost in today's business / cultural
climate.

~~~
greggyb
I think there's little sentiment to it and much practicality.

He raised the wage, in large part, because he _could not retain employees_ due
to the work conditions.

~~~
chiefalchemist
Right. And today, instead, churn is accepted. "Leadership" blames staff for
being unmotivated, etc.

Put another way, Ford understood that to get what he wanted he'd have to
consider the fate and faith of his employees. Do you think that's how Bezos
thinks?

~~~
bluGill
Bezos has to mitigate the cost of turnover somehow. You can mitigate it by
reducing it (as Ford did), or you can mitigate by having faster training so
new hires are productive faster. Both can fail.

~~~
chiefalchemist
OK. Don't take this the wrong way but let me repeat the statement + question:

Put another way, Ford understood that to get what he wanted he'd have to
consider the fate and faith of his employees. Do you think that's how Bezos
thinks?

I think what you're saying is - correct me if I'm wrong - Bezos does __not__
factor in his employees in the way Ford did.

p.s. The fact that we even have the term "human resources" tells us a lot, eh.

~~~
bluGill
Right, Bezos currently doesn't see value in treating his employees well. (or
so I'm given to understand - I don't have any knowledge) This can change.

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exabrial
There is a massive difference between employers raising minimum wage (healthy
for the economy, good for the individual, healthy for the employer), and the
government raising minimum wage ( hurts the economy, regressive against low
income individuals, bad for the individual, bad for employers).

~~~
srfilipek
> hurts the economy, regressive against low income individuals, bad for the
> individual, bad for employers

[citation needed]

Actual data tends to disagree:
[https://www.nber.org/papers/w4509](https://www.nber.org/papers/w4509)

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pjc50
> “The owner, the employees, and the buying public are all one and the same,
> and unless an industry can so manage itself as to keep wages high and prices
> low it destroys itself, for otherwise it limits the number of its customers.
> One’s own employees ought to be one’s own best customers.”

I note that in a world of globalising trade this isn't true - there are vast
untapped reserves of both employees _and customers_ out there. It then becomes
possible to cannibalise the existing market through unsustainable practices.
Until the global market as a whole is lifted up to the same level.

~~~
leetcrew
> One’s own employees ought to be one’s own best customers.

taken literally this is an absurd claim. sure it makes sense if you're making
the first mass produced car, but no matter how well my company treats me, I'm
not going to buy their niche B2B software.

------
slg
You aren’t getting the complete picture if you discuss the $5 workday without
also mentioning Ford’s Sociological Department. They were basically a group of
investigators that looked into numerous aspects of Ford’s employees personal
lives. If your kid didn’t go to school, if you kitchen wasn’t clean enough, if
you spent too much time at the bar, if you weren’t saving enough, you wouldn’t
qualify for $5 a day. That new salary wasn’t purely a capitalist endeavor, it
was a totalitarian endeavor that gave Ford the ability to control the lives of
his employees.

~~~
maxlybbert
Please don’t give anyone ideas ;-).

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dredmorbius
The industry didn't take kindly to this:

 _Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668 (Mich. 1919)[1] is
a case in which the Michigan Supreme Court held that Henry Ford had to operate
the Ford Motor Company in the interests of its shareholders, rather than in a
charitable manner for the benefit of his employees or customers. It is often
cited as affirming the principle of "shareholder primacy" in corporate
America. At the same time, the case affirmed the business judgment rule,
leaving Ford an extremely wide latitude about how to run the company...._

[https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co](https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co).

------
psoots
How is there no mention of the strength of organized labor during that period
in the article or any of these comments? That was a big part of what motivated
Ford to appease the workers when rolling out his new flexible production
system. It wasn't his benevolence.

Ford, the company, along with GM gave up that system half a century later for
a more rigid system that included more outsourcing but had the upside of being
impermeable to strikes. Toyota on the other hand continued the flexible system
along with the higher cost of labor and royally outsmarted the American
companies in the 70s.

The role of organized labor shouldn't be ignored. And neither should the
competitve advantage of working with well-skilled and well-contented labor.

~~~
Aloha
The strength of organized labor, particularly at Ford in 1914 was weak, both
GM and Chrysler unionized in 1937, Ford was the last to do so of the big
three, holding out until 1941.

Ford's rationale for increasing the wage for his workers, as laid out by him,
was to make it so every Ford employee could buy a Ford car.

If you're curious, and want to know more about Ford Motor Company, I highly
recommend a book called Wheels for the World by Douglas Brinkley.
([https://www.amazon.com/gp/product/067003181X/](https://www.amazon.com/gp/product/067003181X/))
Ford opened its full archives to the author, and it covers their entire
history, warts and all.

~~~
crdoconnor
>The strength of organized labor, particularly at Ford in 1914 was weak

It was about seeing off an incipient threat. IWW were quite active at the
time. Amazon's goal last year was similar when they raised wages even though
they refused to recognize the union.

>Ford's rationale for increasing the wage for his workers as laid out by him,
was to make it so every Ford employee could buy a Ford car.

Which was obviously bullshit. The effect employees buying cars could have had
on the bottom line was far outstripped by the increased wage bill.

------
EliRivers
_Ford employees would be “demoralized by this sudden affluence,”_

Love it. Workers are _better off_ poor!

~~~
nullandvoid
That statement made me laugh also

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lowken10
Ford doubling his minimum wage is simply an example of capitalism (not
government) raising wages. This is why capitalism is the greatest economic
system (by a mile) ever devised.

~~~
ajuc
And it's so common we have 1 example from a century ago and we're still
talking about it.

~~~
ApolloFortyNine
What are you arguing? That wages haven't risen since?

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blueline
wages have absolutely not risen proportional to worker productivity

[https://www.epi.org/productivity-pay-gap/](https://www.epi.org/productivity-
pay-gap/)

~~~
logicchains
An increase in aggregate worker productivity isn't necessarily an increase in
the ability of workers; most productivity gains are attributable to capital
investment. If you took a productive modern worker back 500 years, they
wouldn't be much more productive than the locals of that time, as they'd lack
the tooling, machinery, resources, equipment and factories that magnify human
productivity today. It hence makes sense that the gains from rises in
productivity wouldn't all accrue to workers, as the gains result from the
actions of business owners investing in better means of production, not from
action on the workers' part.

~~~
astazangasta
All productivity gain is the result of capital investment. That doesn't mean
the benefits should not accrue to workers. Who do you think is provisioning,
configuring and using the machines that result in that gain? Shareholders?

