For clarity's sake, allow me to quote...me:
Once people like 'ole Henry Ford figured out that paying people more than starvation wages turned them into customers and not just labor, things changed again. Coupled with the efforts of labor movements, we went from having to work sunup to sundown in order to merely survive, to working in order to make a living. A little extra money and a little extra time on the hands of the workers moved things forward. Consumer goods and services became a much larger part of the economy. A middle class emerged, made up of people who would have merely survived a generation or two earlier.
Now, instead of starting work on the farm as a kid and working all the time until you died, you could put in a third of your day working, have weekends off, and still make enough to have a chicken in the pot and a car in the garage.
Now, I'm willing to concede that Henry probably didn't raise his workers' wages as a result of a "eureka...they can buy a Model T!" moment, but he certainly understood that higher wages were a net positive.
But that's only half the equation. The other half is the "coupled with the efforts of labor movements" part. Did nobody catch that? Apparently not.
As I understand things, Henry Ford (like just about any industrialist of the age) hated unions. Hated organized labor. Hated making concessions to his employees. But again, the higher wages were a good thing no matter the reason. Higher wages leads to disposable income which leads to demand for consumer goods which leads to an expanding economy.
Can someone please explain how lower wages lead to economic growth? I'll wait.
