22 ms·

The story of Henry Ford's $5 a day wages: not what you think (2012)

157 points by hhs 7y ago

irjustin 7y ago
Today, I don't think the general public buys that story cover. Probably back in Ford's time. Ford had to raise wages because it was actually cheaper than to not to. If we want to look at a good analog today, I would point to software engineers.
hindsightbias 7y ago
Stopped reading when he compared a commodity auto market to Boeing.
- dredmorbius 7y ago
  You can stop when you see Worstall's name. Absolute lying imbecile.
iguy 7y ago
Another facet not mentioned is unemployment. The world of pretty casual factory work (52k hires/year with 14k employees) was one in which (say) a 20% decline in work meant the average guy waited an extra 2.8 weeks before starting the next job, which he did a few times each year. It's pretty easy to save/borrow enough for a few weeks. But in Ford's new world of more-or-less employment for life, a 20% decline meant 20% got fired, and those guys now waited on the bench until the economy recovered. This is, I think, part of why the great depression was so unpleasant, compared to 19th century recessions. (For clarity, I don't think this was anybody's intention, just a consequence of higher-skill jobs being less flexible. Nor that it was the entire story.)
sixhobbits 7y ago
part of an account I heard of this somewhere else was that the turnover of employees was specifically between car manufacturers. Because they all paid more or less the same, if a worker got annoyed he would leave with no notice and go to a competitor. Ford also refused to re-hire anyone who had previously quit, so the $5 was a great example of "Golden handcuffs". People would think twice before leaving, knowing they would be making 50% for the foreseeable future if they did.
- ClumsyPilot 7y ago
  Is a blanket ban on re-hires legal? It does not sound legitimate/legal. Surely a hiring decision should be based on employee skills/performance, and not punish general life choices?
  - sixhobbits 7y ago
    I'm not an expert! But my impression is labour law was pretty different then and very employer focused.
csours 7y ago
Why does my company give a raise every year: If they don't, I'll leave. Why does my company employ me in the first place: If they didn't, they would make less money.
- maest 7y ago
  That's almost correct. You have to qualify those values as "risk adjusted".
  - csours 7y ago
    That's why they don't give me a big raise.
- lotsofpulp 7y ago
  > Why does my company give a raise every year: If they don't, I'll leave. AND someone decided it probably costs less than hiring a replacement for you.
  - unlinked_dll 7y ago
    I don't think people responsible for making those decisions are always adept at calculating what those costs are, and they aren't always empowered to make the fiscally sound choice.
mjw1007 7y ago
The story makes a good deal of sense if, in general, wages are set only partly by supply and demand, and partly by the employers-as-a-class's feelings of how much money people doing that sort of job ought to earn. In this case production line workers were a relatively new thing, and Ford was helping to create a consensus about where they would fit in. Part of the reason why simple supply and demand doesn't dictate a single level of wages is that there's a good deal of flexibility in what doing a job entails. In this case it seems Ford was helping to decide that the workers would be skilled labourers: there'd be a training cost (what the article calls "a costly break-in period") and high enough wages to reduce turnover so as to amortise that cost. The business about "character requirements" and visiting the employees' homes also looks like a conscious attempt to control where the workers fit in the class system. The alternative would presumably have been to try to organise the production line to require less training, and accept the efficiency loss in exchange for the lower wage bill.
- whack 7y ago
  > In this case it seems Ford was helping to decide that the workers would be skilled labourers When given a choice, employers would far prefer to commoditize their employees. It gives them far more power in the relationship and lowers their costs. Skilled workers are treated as such, not because employers want it, but because the circumstances don't give them a better choice. > there'd be a training cost (what the article calls "a costly break-in period") and high enough wages to reduce turnover so as to amortise that cost. This is exactly what the article says as well. Ford paid his employees very well to reduce turnover and its associated costs. Not because he was trying to create additional demand for his cars.
  - mjw1007 7y ago
    He could be doing both. NB I have no reason to suppose the story is actually true. Very likely it isn't. But the motivation the story claims Ford had does make sense. He was in a position to influence other employers' decisions by reputation, not just via the price mechanism. If there's one equilibrium where factory workers in general end up as unskilled labourers, and another where they end up as skilled, the latter is better for Ford because of the products he happens to sell.
34679 7y ago
I don't disagree with the article, but the false equivalency at the beginning is pretty annoying. >It should be obvious that this story doesn't work: Boeing would most certainly be in trouble if they had to pay their workers sufficient to afford a new jetliner. You could go the other extreme and ask the same question about paperclips, but paperclips are a poor substitute for automobiles. The equivalent of a jetliner in Ford's day would probably be closer to the Titanic than a Model T.
- mjw1007 7y ago
  Right. I think Worstall is correct that the story only makes sense if the pay decision can be generalised to other companies, otherwise it won't have enough effect on the market. But there's no good reason to generalise "Ford workers should be able to afford cars" to "company X workers should be able to afford company X products". Rather it should turn into something like "Factory workers should be able to afford cars".
- SilasX 7y ago
  No, that's the point[1]: it's dubious to think that the worker's wages should bear any relationship to the finished product.[2] That's all the author is establishing there. Yes, paying workers just enough so they can afford a paperclip is obviously a bad idea. Yes, paying workers just enough so they can afford a 747 is obviously a bad idea. Yes, it's still a bad idea when an efficient wage would be just enough for them to afford the same product (here, a Model T) you're producing. Even if that is a good idea here, the standard -- pay workers enough to buy the output -- is a bad one, because the output could be anything from a cheap consumer good to a megaproject. [1] which, full disclosure, I've made myself: http://blog.tyrannyofthemouse.com/2012/01/mr-ford-meet-boeing.html http://blog.tyrannyofthemouse.com/2012/01/mr-ford-meet-boein... [2] even under general mechanisms by which "price tends to cost" and intelligent uses of the labor theory of value, a worker might be contributing a valuable input (engineering design), or a not-so-valuable input (cleaning services for the offices).
  - 34679 7y ago
    Boeing never intended to build a product that an average American can afford. Ford set out to do exactly that.
_red 7y ago
1913 US dollar backed by gold @ $25/oz. Therefore was 1/5 oz of gold. Thats a 2020 equivalent to $300 per day and there was no income tax. This is whats been stolen from you.
- RubenvanE 7y ago
  A better way to find the 2020 equivalent of $5.00 would be to look at the change in Consumer Price Index (CPI) over the past century. The CPI changed from 9.9 in 1913 to 255.7 in 2019. So $5.00 dollars in 1913 is equal to about $130.00 in 2020.
  - _red 7y ago
    >CPI * hedonic adjustments * variable basket of goods * structurally created to understate inflation to save gov money on entitlement payments
    - derriz 7y ago
      The difficulties with CPI are well known to economists and anyone interested in historical finance. But its flaws are insignificant compared to using the price of gold as a measuring stick - given how volatile its price is. By your method of calculating equivalent amounts, the $5 a day was worth $300 in 2020 but only $200 in 2016 - or $380 in 2012 or $50 in 2002.
      - fuzzfactor 7y ago
        IRC these wide variations are all due to relatively greater fluctuations in the value of the dollar compared to relatively lesser fluctuations in the functional value of gold. With uneven but too-frequent devaluation events, the US dollar, or indices based on it, certainly does not have enough continuity to make accurate trending across the previous century feasible. These events are usually reserved for situations when other assets are in extreme flux, exacerbating the difficulty accommodating the discontinuity. This has been by design.
- 7y ago
austincheney 7y ago
The article centers on this: > The point is not so as to be paying a "decent wage" or anything of that sort: it is to be paying a higher wage than other employers. There are a couple of key take things to take away from that. * The employer is less pressured to find candidates. Candidates will find the employer if it means double wages. * The employer has more choices. They aren't locked into settling for somebody vaguely competent from a limited pool of applicants. * Employees are locked in knowing they cannot go somewhere else for equivalent money. Despite those points there are limitations to this approach. For example, I have known many low income people who would not join the military even though it could mean double or more in wages. Likewise I have also known many people who refuse to get into software knowing they could double their wages. I would also be willing to accept lower wages elsewhere if the work were engaging and meaningful (however a person defines meaningful). The only way that super high wages make sense numerically is if it results in retaining employees for a longer enough period to reduce expenses of employee replacement over a satisfactory time period and results in a premium on choice of employee from the population at large. Wages alone won't provide a combination of those though. There has to be something in addition that makes the employer stand out in world class fashion. That could be unique opportunities, superior training, an accreditation program, research recognition, or something else. If this is missing the organization is going to swell with a certain percentage of bad candidates that will decay the organization over time from the inside out. Government agencies emphasize the later more than the former because they have budget limitations on what they are allowed to pay employees and because the later has proven more historically reliable at retainment.
- smt88 7y ago
  > * The only way that super high wages make sense numerically is if it results in retaining employees for a longer enough period to reduce expenses of employee replacement over a satisfactory time period and results in a premium on choice of employee from the population at large.* This ignores the large increase in productivity from each individual employee. Better-paid employees are less stressed, healthier, less busy at home (because they can afford domestic help), and spend less time commuting. All of those things provide ROI for higher wages irrespective of turnover.
thaumaturgy 7y ago
Beware of getting history lessons from fellows at the Adam Smith Institute. As is almost always the case with history, the truth is a bit more nuanced and needs more than one conservative's blog for a full treatment. The policy did come directly from Henry Ford [1], and in 1926, Ford himself wrote: > "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." [ibid] Although employee turnover may have been a factor, the source material for Tim Worstall's quoted excerpt in 2012 continued, > "The $5-a-day rate was about half pay and half bonus. The bonus came with character requirements and was enforced by the Socialization Organization. This was a committee that would visit the employees' homes to ensure that they were doing things the "American way." They were supposed to avoid social ills such as gambling and drinking. They were to learn English, and many (primarily the recent immigrants) had to attend classes to become "Americanized." Women were not eligible for the bonus unless they were single and supporting the family. Also, men were not eligible if their wives worked outside the home. Other groups also offered classes to help immigrants and southern blacks adapt to the Detroit area, but none were so prominent as the Ford plan." [2] And this is where so much more of the nuance really comes in to play, because Ford was a complex character. Among his complexities was a really paternalistic view of his workers and of society; he believed in an idealized, perfect society, and sought to create it and to force others to live in it. [3] The $5-a-day plan solved a handful of problems then. It gave Ford a lot of free advertising in the press, it added a significant amount of pressure to his competitors, it ultimately made his automobile a little bit cheaper, and it supported his paternalism for his workers. You could do worse for a modern analogue for Henry Ford than Elon Musk. He's a really divisive figure in a lot of discussions, alternately driven by impassioned visions of a hypothetical society and by larger-than-normal faults. He makes decisions that are part business and part ideology, and so did Ford. [1]: https://www.saturdayeveningpost.com/2014/01/ford-doubles-minimum-wage/ https://www.saturdayeveningpost.com/2014/01/ford-doubles-min... [2]: http://web.archive.org/web/20121224153214/https://www.michigan.gov/dnr/0,1607,7-153-54463_18670_18793-53441--,00.html http://web.archive.org/web/20121224153214/https://www.michig... [3]: Fordlandia: The Rise and Fall of Henry Ford's Forgotten Jungle City
- 7y ago
thethethethe 7y ago
>It should be obvious that this story doesn't work: Boeing would most certainly be in trouble if they had to pay their workers sufficient to afford a new jetliner. This is a terrible strawman. One could easily argue that Boeing should pay their employees enough so they could afford plane tickets to fly in Boeing jets. Comparing a commodity product to a commercial product like this article does is narrow and silly.
- mcguire 7y ago
  Well, it is Forbes.
  - ChrisSD 7y ago
    To be clear, this is not Forbes. This is forbes.com/sites/ which is an unedited blogging network. So long as a blog brings in clicks and doesn't cause problems for Forbes then they don't much care what is posted.
    - baddox 7y ago
      It's not unreasonable to expect Forbes' editorial control to extend to everything they host on their domain.
    - xyzzyz 7y ago
      If it's at forbes.com, and has Forbes logo at the top, it's Forbes. If they don't like the brand damage this is creating, tough luck: they can't have their cake and eat it too.
  - maxerickson 7y ago
    Forbes, the blog farm that used to be a magazine.
    - DiabloD3 7y ago
      Forbes died the moment Forbes himself died. This was in 1954. Forbes, the magazine, has been going down hill since then, and most of us have only been alive for around half that time.
baybal2 7y ago
You boss being generous does not have to mean him being lax. Laxity and lack of seriousness are bad for the company. All bad bosses I had were like that.
- fuzzfactor 7y ago
  The moral of the story is you're supposed to be generous to your employees by reflex without having to wait for excess labor difficulties or costs to become quantifiable. Pinpointed savings will always be limited and never correlate very well with the unlimited advantage of a more motivated staff after all.
rmrfstar 7y ago
Seriously, please read about how creepy Ford was, this article does not do it justice. [1] There are other tech titans with strong ideological views about how you should live. [2] Fun fact: Ford hired "private detectives" who used machine guns to murder striking workers. [3] Know your history. There is nothing new under the sun. [1] https://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=2124&context=dissertations https://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=2... [2] https://youtu.be/xM9GMGDsKUU?t=859 https://youtu.be/xM9GMGDsKUU?t=859 [3] https://en.wikipedia.org/wiki/Ford_Hunger_March https://en.wikipedia.org/wiki/Ford_Hunger_March
- rumanator 7y ago
  > Seriously, please read about how creepy Ford was, this article does not do it justice. What surprised me the most is that Ford's decision to increase wages was actually to use Ford's dominance to pull an anti-competitive play on his rivals to try to dry them of talent and manpower, which back in the days actually was deeply tied to the throughput and quality of the product that comes out of their production lines. Thus by paying a little extra to their workers, you in practice are killing off your competition by strangling their ability to produce competing products. It surprised me that the author showed ignorance in a way that forced him to use some imagination to come up with absurd argumrnts when he did not needed to.
  - rmrfstar 7y ago
    In what way did the author use any more imagination than you just used? If you have a primary source that has Ford saying "I'm increasing wages to cultivate a monopsony over labor" I would be very impressed.
  - stale2002 7y ago
    How in the world is that "anti-competitive"? It sounds like you are saying that these workers were worth a lot of money, as they determined the quality of the cars. So... that means that they were actually worth those higher wages. Anti-competitive would instead be if a company did something that was unprofitable in the short term. This wasn't unprofitable in the short term! It makes perfect business sense to pay lots of money to highly skilled workers that are legitimately worth that money!
worik 7y ago
Repeated use of a straw man argument. I knew that retention was a reason for higher pay. But social inclusion was too, that is the surplus of money and ability to join in consumer culture. (I doubt Henry used terms like that!) "It was nothing at all to do with creating a workforce that could afford to buy the products" is simply a lie. That was part of the reason.
- ncmncm 7y ago
  It was promoted as the reason, but all the evidence directly contradicts that.
tehjoker 7y ago
Essentially employee non-compliance with a capitalist induced higher wages. What a wonder.
forkexec 7y ago
The International Jew: The World's Problem Ford's articles published in The Dearborn Independent - Ford's personal newspaper, and later published as a book. https://en.wikipedia.org/wiki/The_International_Jew https://en.wikipedia.org/wiki/The_International_Jew And let's not forget the bromance between Ford and Hitler. “only a single great man, Ford, [who], to [the Jews’] fury, still maintains full independence…[from] the controlling masters of the producers in a nation of one hundred and twenty millions” - Mein Kampf by Adolf Hitler https://rarehistoricalphotos.com/henry-ford-grand-cross-1938/ https://rarehistoricalphotos.com/henry-ford-grand-cross-1938... Also one of the many antisemitic conspiracy theories Ford espoused: Jews have always controlled the business... The motion picture influence of the United States and Canada...is exclusively under the control, moral and financial, of the Jewish manipulators of the public mind. - Henry Ford
- rmrfstar 7y ago
  Why was this down-voted? If we don't pause to examine the dramatic moral failings of earlier tech titans, how will we identify our era's blind spots?
ruytlm 7y ago
The most fascinating part of this article to me is the choice to represent dollar amounts like $9,250,000 as "$9 1/4 million". I don't think I've seen a non-decimal format used for currency outside of history books talking about pre-decimal currencies.
6510 7y ago
I'm not a communist in that I feel we should reward effort, experience and commitment but that said I also think grunt work and bean counting are equally important to get a product out there. There is nothing logical about squeezing the grunt work as much as possible for the benefit of the bean counter. Its just theft. I one time oversimplified the situation like this: We could examine each sector for innovation. If there is not enough or a sufficient lack of it government can run the operation. The idea needs a bit of fine tuning to house the remnants of innovation in competitive commercial hands.

157 points by hhs 7y ago

Today, I don't think the general public buys that story cover. Probably back in Ford's time. Ford had to raise wages because it was actually cheaper than to not to. If we want to look at a good analog today, I would point to software engineers.

hindsightbias 7y ago

Stopped reading when he compared a commodity auto market to Boeing.

dredmorbius 7y ago
You can stop when you see Worstall's name. Absolute lying imbecile.

iguy 7y ago

Another facet not mentioned is unemployment. The world of pretty casual factory work (52k hires/year with 14k employees) was one in which (say) a 20% decline in work meant the average guy waited an extra 2.8 weeks before starting the next job, which he did a few times each year. It's pretty easy to save/borrow enough for a few weeks. But in Ford's new world of more-or-less employment for life, a 20% decline meant 20% got fired, and those guys now waited on the bench until the economy recovered. This is, I think, part of why the great depression was so unpleasant, compared to 19th century recessions. (For clarity, I don't think this was anybody's intention, just a consequence of higher-skill jobs being less flexible. Nor that it was the entire story.)

sixhobbits 7y ago

part of an account I heard of this somewhere else was that the turnover of employees was specifically between car manufacturers. Because they all paid more or less the same, if a worker got annoyed he would leave with no notice and go to a competitor. Ford also refused to re-hire anyone who had previously quit, so the $5 was a great example of "Golden handcuffs". People would think twice before leaving, knowing they would be making 50% for the foreseeable future if they did.

ClumsyPilot 7y ago
Is a blanket ban on re-hires legal? It does not sound legitimate/legal. Surely a hiring decision should be based on employee skills/performance, and not punish general life choices?
- sixhobbits 7y ago
  I'm not an expert! But my impression is labour law was pretty different then and very employer focused.

csours 7y ago

Why does my company give a raise every year: If they don't, I'll leave. Why does my company employ me in the first place: If they didn't, they would make less money.

maest 7y ago
That's almost correct. You have to qualify those values as "risk adjusted".
- csours 7y ago
  That's why they don't give me a big raise.
lotsofpulp 7y ago
> Why does my company give a raise every year: If they don't, I'll leave. AND someone decided it probably costs less than hiring a replacement for you.
- unlinked_dll 7y ago
  I don't think people responsible for making those decisions are always adept at calculating what those costs are, and they aren't always empowered to make the fiscally sound choice.

mjw1007 7y ago

The story makes a good deal of sense if, in general, wages are set only partly by supply and demand, and partly by the employers-as-a-class's feelings of how much money people doing that sort of job ought to earn. In this case production line workers were a relatively new thing, and Ford was helping to create a consensus about where they would fit in. Part of the reason why simple supply and demand doesn't dictate a single level of wages is that there's a good deal of flexibility in what doing a job entails. In this case it seems Ford was helping to decide that the workers would be skilled labourers: there'd be a training cost (what the article calls "a costly break-in period") and high enough wages to reduce turnover so as to amortise that cost. The business about "character requirements" and visiting the employees' homes also looks like a conscious attempt to control where the workers fit in the class system. The alternative would presumably have been to try to organise the production line to require less training, and accept the efficiency loss in exchange for the lower wage bill.

whack 7y ago
> In this case it seems Ford was helping to decide that the workers would be skilled labourers When given a choice, employers would far prefer to commoditize their employees. It gives them far more power in the relationship and lowers their costs. Skilled workers are treated as such, not because employers want it, but because the circumstances don't give them a better choice. > there'd be a training cost (what the article calls "a costly break-in period") and high enough wages to reduce turnover so as to amortise that cost. This is exactly what the article says as well. Ford paid his employees very well to reduce turnover and its associated costs. Not because he was trying to create additional demand for his cars.
- mjw1007 7y ago
  He could be doing both. NB I have no reason to suppose the story is actually true. Very likely it isn't. But the motivation the story claims Ford had does make sense. He was in a position to influence other employers' decisions by reputation, not just via the price mechanism. If there's one equilibrium where factory workers in general end up as unskilled labourers, and another where they end up as skilled, the latter is better for Ford because of the products he happens to sell.

34679 7y ago

I don't disagree with the article, but the false equivalency at the beginning is pretty annoying. >It should be obvious that this story doesn't work: Boeing would most certainly be in trouble if they had to pay their workers sufficient to afford a new jetliner. You could go the other extreme and ask the same question about paperclips, but paperclips are a poor substitute for automobiles. The equivalent of a jetliner in Ford's day would probably be closer to the Titanic than a Model T.

mjw1007 7y ago
Right. I think Worstall is correct that the story only makes sense if the pay decision can be generalised to other companies, otherwise it won't have enough effect on the market. But there's no good reason to generalise "Ford workers should be able to afford cars" to "company X workers should be able to afford company X products". Rather it should turn into something like "Factory workers should be able to afford cars".
SilasX 7y ago
No, that's the point[1]: it's dubious to think that the worker's wages should bear any relationship to the finished product.[2] That's all the author is establishing there. Yes, paying workers just enough so they can afford a paperclip is obviously a bad idea. Yes, paying workers just enough so they can afford a 747 is obviously a bad idea. Yes, it's still a bad idea when an efficient wage would be just enough for them to afford the same product (here, a Model T) you're producing. Even if that is a good idea here, the standard -- pay workers enough to buy the output -- is a bad one, because the output could be anything from a cheap consumer good to a megaproject. [1] which, full disclosure, I've made myself: http://blog.tyrannyofthemouse.com/2012/01/mr-ford-meet-boeing.html http://blog.tyrannyofthemouse.com/2012/01/mr-ford-meet-boein... [2] even under general mechanisms by which "price tends to cost" and intelligent uses of the labor theory of value, a worker might be contributing a valuable input (engineering design), or a not-so-valuable input (cleaning services for the offices).
- 34679 7y ago
  Boeing never intended to build a product that an average American can afford. Ford set out to do exactly that.

_red 7y ago

1913 US dollar backed by gold @ $25/oz. Therefore was 1/5 oz of gold. Thats a 2020 equivalent to $300 per day and there was no income tax. This is whats been stolen from you.

RubenvanE 7y ago
A better way to find the 2020 equivalent of $5.00 would be to look at the change in Consumer Price Index (CPI) over the past century. The CPI changed from 9.9 in 1913 to 255.7 in 2019. So $5.00 dollars in 1913 is equal to about $130.00 in 2020.
- _red 7y ago
  >CPI * hedonic adjustments * variable basket of goods * structurally created to understate inflation to save gov money on entitlement payments
  - derriz 7y ago
    The difficulties with CPI are well known to economists and anyone interested in historical finance. But its flaws are insignificant compared to using the price of gold as a measuring stick - given how volatile its price is. By your method of calculating equivalent amounts, the $5 a day was worth $300 in 2020 but only $200 in 2016 - or $380 in 2012 or $50 in 2002.
    - fuzzfactor 7y ago
      IRC these wide variations are all due to relatively greater fluctuations in the value of the dollar compared to relatively lesser fluctuations in the functional value of gold. With uneven but too-frequent devaluation events, the US dollar, or indices based on it, certainly does not have enough continuity to make accurate trending across the previous century feasible. These events are usually reserved for situations when other assets are in extreme flux, exacerbating the difficulty accommodating the discontinuity. This has been by design.
7y ago

austincheney 7y ago

The article centers on this: > The point is not so as to be paying a "decent wage" or anything of that sort: it is to be paying a higher wage than other employers. There are a couple of key take things to take away from that. * The employer is less pressured to find candidates. Candidates will find the employer if it means double wages. * The employer has more choices. They aren't locked into settling for somebody vaguely competent from a limited pool of applicants. * Employees are locked in knowing they cannot go somewhere else for equivalent money. Despite those points there are limitations to this approach. For example, I have known many low income people who would not join the military even though it could mean double or more in wages. Likewise I have also known many people who refuse to get into software knowing they could double their wages. I would also be willing to accept lower wages elsewhere if the work were engaging and meaningful (however a person defines meaningful). The only way that super high wages make sense numerically is if it results in retaining employees for a longer enough period to reduce expenses of employee replacement over a satisfactory time period and results in a premium on choice of employee from the population at large. Wages alone won't provide a combination of those though. There has to be something in addition that makes the employer stand out in world class fashion. That could be unique opportunities, superior training, an accreditation program, research recognition, or something else. If this is missing the organization is going to swell with a certain percentage of bad candidates that will decay the organization over time from the inside out. Government agencies emphasize the later more than the former because they have budget limitations on what they are allowed to pay employees and because the later has proven more historically reliable at retainment.

smt88 7y ago
> * The only way that super high wages make sense numerically is if it results in retaining employees for a longer enough period to reduce expenses of employee replacement over a satisfactory time period and results in a premium on choice of employee from the population at large.* This ignores the large increase in productivity from each individual employee. Better-paid employees are less stressed, healthier, less busy at home (because they can afford domestic help), and spend less time commuting. All of those things provide ROI for higher wages irrespective of turnover.

thaumaturgy 7y ago

Beware of getting history lessons from fellows at the Adam Smith Institute. As is almost always the case with history, the truth is a bit more nuanced and needs more than one conservative's blog for a full treatment. The policy did come directly from Henry Ford [1], and in 1926, Ford himself wrote: > "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." [ibid] Although employee turnover may have been a factor, the source material for Tim Worstall's quoted excerpt in 2012 continued, > "The $5-a-day rate was about half pay and half bonus. The bonus came with character requirements and was enforced by the Socialization Organization. This was a committee that would visit the employees' homes to ensure that they were doing things the "American way." They were supposed to avoid social ills such as gambling and drinking. They were to learn English, and many (primarily the recent immigrants) had to attend classes to become "Americanized." Women were not eligible for the bonus unless they were single and supporting the family. Also, men were not eligible if their wives worked outside the home. Other groups also offered classes to help immigrants and southern blacks adapt to the Detroit area, but none were so prominent as the Ford plan." [2] And this is where so much more of the nuance really comes in to play, because Ford was a complex character. Among his complexities was a really paternalistic view of his workers and of society; he believed in an idealized, perfect society, and sought to create it and to force others to live in it. [3] The $5-a-day plan solved a handful of problems then. It gave Ford a lot of free advertising in the press, it added a significant amount of pressure to his competitors, it ultimately made his automobile a little bit cheaper, and it supported his paternalism for his workers. You could do worse for a modern analogue for Henry Ford than Elon Musk. He's a really divisive figure in a lot of discussions, alternately driven by impassioned visions of a hypothetical society and by larger-than-normal faults. He makes decisions that are part business and part ideology, and so did Ford. [1]: https://www.saturdayeveningpost.com/2014/01/ford-doubles-minimum-wage/ https://www.saturdayeveningpost.com/2014/01/ford-doubles-min... [2]: http://web.archive.org/web/20121224153214/https://www.michigan.gov/dnr/0,1607,7-153-54463_18670_18793-53441--,00.html http://web.archive.org/web/20121224153214/https://www.michig... [3]: Fordlandia: The Rise and Fall of Henry Ford's Forgotten Jungle City

7y ago

thethethethe 7y ago

>It should be obvious that this story doesn't work: Boeing would most certainly be in trouble if they had to pay their workers sufficient to afford a new jetliner. This is a terrible strawman. One could easily argue that Boeing should pay their employees enough so they could afford plane tickets to fly in Boeing jets. Comparing a commodity product to a commercial product like this article does is narrow and silly.

mcguire 7y ago
Well, it is Forbes.
- ChrisSD 7y ago
  To be clear, this is not Forbes. This is forbes.com/sites/ which is an unedited blogging network. So long as a blog brings in clicks and doesn't cause problems for Forbes then they don't much care what is posted.
  - baddox 7y ago
    It's not unreasonable to expect Forbes' editorial control to extend to everything they host on their domain.
  - xyzzyz 7y ago
    If it's at forbes.com, and has Forbes logo at the top, it's Forbes. If they don't like the brand damage this is creating, tough luck: they can't have their cake and eat it too.
- maxerickson 7y ago
  Forbes, the blog farm that used to be a magazine.
  - DiabloD3 7y ago
    Forbes died the moment Forbes himself died. This was in 1954. Forbes, the magazine, has been going down hill since then, and most of us have only been alive for around half that time.

baybal2 7y ago

You boss being generous does not have to mean him being lax. Laxity and lack of seriousness are bad for the company. All bad bosses I had were like that.

fuzzfactor 7y ago
The moral of the story is you're supposed to be generous to your employees by reflex without having to wait for excess labor difficulties or costs to become quantifiable. Pinpointed savings will always be limited and never correlate very well with the unlimited advantage of a more motivated staff after all.

rmrfstar 7y ago

Seriously, please read about how creepy Ford was, this article does not do it justice. [1] There are other tech titans with strong ideological views about how you should live. [2] Fun fact: Ford hired "private detectives" who used machine guns to murder striking workers. [3] Know your history. There is nothing new under the sun. [1] https://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=2124&context=dissertations https://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=2... [2] https://youtu.be/xM9GMGDsKUU?t=859 https://youtu.be/xM9GMGDsKUU?t=859 [3] https://en.wikipedia.org/wiki/Ford_Hunger_March https://en.wikipedia.org/wiki/Ford_Hunger_March

rumanator 7y ago
> Seriously, please read about how creepy Ford was, this article does not do it justice. What surprised me the most is that Ford's decision to increase wages was actually to use Ford's dominance to pull an anti-competitive play on his rivals to try to dry them of talent and manpower, which back in the days actually was deeply tied to the throughput and quality of the product that comes out of their production lines. Thus by paying a little extra to their workers, you in practice are killing off your competition by strangling their ability to produce competing products. It surprised me that the author showed ignorance in a way that forced him to use some imagination to come up with absurd argumrnts when he did not needed to.
- rmrfstar 7y ago
  In what way did the author use any more imagination than you just used? If you have a primary source that has Ford saying "I'm increasing wages to cultivate a monopsony over labor" I would be very impressed.
- stale2002 7y ago
  How in the world is that "anti-competitive"? It sounds like you are saying that these workers were worth a lot of money, as they determined the quality of the cars. So... that means that they were actually worth those higher wages. Anti-competitive would instead be if a company did something that was unprofitable in the short term. This wasn't unprofitable in the short term! It makes perfect business sense to pay lots of money to highly skilled workers that are legitimately worth that money!

worik 7y ago

Repeated use of a straw man argument. I knew that retention was a reason for higher pay. But social inclusion was too, that is the surplus of money and ability to join in consumer culture. (I doubt Henry used terms like that!) "It was nothing at all to do with creating a workforce that could afford to buy the products" is simply a lie. That was part of the reason.

ncmncm 7y ago
It was promoted as the reason, but all the evidence directly contradicts that.

tehjoker 7y ago

Essentially employee non-compliance with a capitalist induced higher wages. What a wonder.

forkexec 7y ago

The International Jew: The World's Problem Ford's articles published in The Dearborn Independent - Ford's personal newspaper, and later published as a book. https://en.wikipedia.org/wiki/The_International_Jew https://en.wikipedia.org/wiki/The_International_Jew And let's not forget the bromance between Ford and Hitler. “only a single great man, Ford, [who], to [the Jews’] fury, still maintains full independence…[from] the controlling masters of the producers in a nation of one hundred and twenty millions” - Mein Kampf by Adolf Hitler https://rarehistoricalphotos.com/henry-ford-grand-cross-1938/ https://rarehistoricalphotos.com/henry-ford-grand-cross-1938... Also one of the many antisemitic conspiracy theories Ford espoused: Jews have always controlled the business... The motion picture influence of the United States and Canada...is exclusively under the control, moral and financial, of the Jewish manipulators of the public mind. - Henry Ford

rmrfstar 7y ago
Why was this down-voted? If we don't pause to examine the dramatic moral failings of earlier tech titans, how will we identify our era's blind spots?

ruytlm 7y ago

The most fascinating part of this article to me is the choice to represent dollar amounts like $9,250,000 as "$9 1/4 million". I don't think I've seen a non-decimal format used for currency outside of history books talking about pre-decimal currencies.

6510 7y ago

I'm not a communist in that I feel we should reward effort, experience and commitment but that said I also think grunt work and bean counting are equally important to get a product out there. There is nothing logical about squeezing the grunt work as much as possible for the benefit of the bean counter. Its just theft. I one time oversimplified the situation like this: We could examine each sector for innovation. If there is not enough or a sufficient lack of it government can run the operation. The idea needs a bit of fine tuning to house the remnants of innovation in competitive commercial hands.