Ford vs. modern day minimum wage and overwork

I finally got around to reading more about what Ford said back in the day. I think it’s an urban legend that doubling peoples pay leads to more consumption and that leads to increased prosperity. Ford seems to have believed this himself, but if you read the article he also points out two other things:

1 – he didn’t just double the salaries overnight. He only paid people a competitive salary, which happened to be 2x minimum wage. He found that cheaper people were not productive enough and fired those: “we are not inclined to keep a man who is not worth more than the minimum wage”.

A company that increases the productivity of their employees – rather than waste it – is able to produce more stuff more cheaply. Cheaper stuff means more people people – including but not limited to their own employees – can afford it. That’s all there’s too it. If there was larger supply of skilled workers, he would have paid them minimum wage and the company would have been even more profitable.

2 – much more interesting to me is that he encouraged his employees to get enough rest. He reduced the work week from 6 days to 5. He paid them to rest and to not work in those other days. Resting increased their productivity during work hours so much that it offset the lost time. 

He had to make sure people didn’t just take the extra money and then work two jobs – or drink, like the French (his words). This race to the bottom might be why he lobbied to make this the law. That and such a law would hurt his less efficient competitors.

From (1) follows a very important warning to well intentioned initiatives in places like New York and Los Angeles to increase minimum wage: if employees can’t achieve $15 of productivity per hour, they will become unemployed. Ford is careful not mention the fate (starvation?) of those men he was “not inclined to keep”.

From (2) follows a very important lesson for companies that work their employees to death: more hours *reduces* total productivity. This is still true.

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