Henry Ford Was Right

[ZiprHead]

http://www.saturdayeveningpost.com/2014/01/03/history/post-perspective/ford-doubles-minimum-wage.html

But Ford had an even bigger reason for raising his wages, which he noted in a 1926 book, Today and Tomorrow. It’s as a challenging a statement today as it as 100 years ago. “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.”

It might have been just another of Ford’s wild ideas, except that it proved successful. In 1914, the company sold 308,000 of its Model Ts—more than all other carmakers combined. By 1915, sales had climbed to 501,000. By 1920, Ford was selling a million cars a year.

“We increased the buying power of our own people, and they increased the buying power of other people, and so on and on,” Ford wrote. “It is this thought of enlarging buying power by paying high wages and selling at low prices that is behind the prosperity of this country.”

 

[Nice Squirrel]

http://www.saturdayeveningpost.com/2014/01/03/history/post-perspective/ford-doubles-minimum-wage.html

But Ford had an even bigger reason for raising his wages, which he noted in a 1926 book, Today and Tomorrow. It’s as a challenging a statement today as it as 100 years ago. “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.”

It might have been just another of Ford’s wild ideas, except that it proved successful. In 1914, the company sold 308,000 of its Model Ts—more than all other carmakers combined. By 1915, sales had climbed to 501,000. By 1920, Ford was selling a million cars a year.

“We increased the buying power of our own people, and they increased the buying power of other people, and so on and on,” Ford wrote. “It is this thought of enlarging buying power by paying high wages and selling at low prices that is behind the prosperity of this country.”

Good wages means more purchasing power. Today I went to a city fair, an apple orchard, and a diner. If I made minimum wage, none of the businesses I frequented would have earned any money from me. If we all make minimum wage, the diner and the orchard would be out of business. What makes an economy strong is the amount of money circulating in the system.

 

[coloradoatheist]

Ford was right about using higher pay to increase productivity and reduce turnover. The article mentioned how much improvement there was in production time. If he had not increased the productivity, the pay wages would have only nominally helped with them being able to buy a car.

 

[dismal]

This is one of those myths that can only persist because leftists are bad at math.

It's amazing how stubborn it is. Wishful thinking fallacy I guess.

 

[coloradoatheist]

I'll also find, the higher pay was also contingent on the worker upholding moral actions outside of work and he set up teams to check up on workers at home and outside work. Would the left be okay with corporations doing that today?

 

[ksen]

Ford was right about using higher pay to increase productivity and reduce turnover. The article mentioned how much improvement there was in production time. If he had not increased the productivity, the pay wages would have only nominally helped with them being able to buy a car.

Since when is productivity linked to wages? That hasn't been true for about 35 years now.

 

[Canard DuJour]

This is one of those myths that can only persist because leftists are bad at math.

It's amazing how stubborn it is. Wishful thinking fallacy I guess.

Oh really? To what "bad math" perpetrated by "leftists" like Henry Ford do you refer?

 

[ZiprHead]

I'll also find, the higher pay was also contingent on the worker upholding moral actions outside of work and he set up teams to check up on workers at home and outside work. Would the left be okay with corporations doing that today?

Of course not. What does your point have to do with the economics?

 

[ksen]

I'll also find, the higher pay was also contingent on the worker upholding moral actions outside of work and he set up teams to check up on workers at home and outside work. Would the left be okay with corporations doing that today?

Of course not. What does your point have to do with the economics?

Obviously the only way a company can pay employees more is if the companies get to monitor their employee's behavior outside of work. Without that higher wages are impossible.

 

[braces_for_impact]

This is one of those myths that can only persist because leftists are bad at math.

It's amazing how stubborn it is. Wishful thinking fallacy I guess.

Oh really? To what "bad math" perpetrated by "leftists" like Henry Ford do you refer?

Probably the same "bad math" that plagues other commie pinko leftists like Adam Smith.

 

[dismal]

This is one of those myths that can only persist because leftists are bad at math.

It's amazing how stubborn it is. Wishful thinking fallacy I guess.

Oh really? To what "bad math" perpetrated by "leftists" like Henry Ford do you refer?

You can not make more money by paying your employees more so they can buy your product.

The costs are 100% borne by you. Even if they took 100% of the money you gave them and spent it on your product (a wildly implausible outcome) your profit margin is usually no where near 100%.

Let's take an example: Suppose you raised your employees salaries $1,000,000. They spend X% of that on your product, and you have a Y% profit margin.

If X is 100% and Y is 100% you break even.

If X and Y have realistic values like, say, 5% and 10% you get $1,000,000 * 5% = $50,000 more revenue and $50,000 * 10% = $5000 more gross margin. So your costs went up by $1,000,000 and your margin went up by $5000. This is not "more profit".

 

[Nice Squirrel]

Oh really? To what "bad math" perpetrated by "leftists" like Henry Ford do you refer?

You can not make more money by paying your employees more so they can buy your product.

The costs are 100% borne by you. Even if they took 100% of the money you gave them and spent it on your product (a wildly implausible outcome) your profit margin is usually no where near 100%.

Let's take an example: Suppose you raised your employees salaries $1,000,000. They spend X% of that on your product, and you have a Y% profit margin.

If X is 100% and Y is 100% you break even.

If X and Y have realistic values like, say, 5% and 10% you get $1,000,000 * 5% = $50,000 more revenue and $50,000 * 10% = $5000 more gross margin. So your costs went up by $1,000,000 and your margin went up by $5000. This is not "more profit".

So you fail to sell employee product x and recover nothing. Fine. With nobody able to afford your products, they don't sell and in fantasyland the company goes on to make a fortune selling products to nobody.

 

[coloradoatheist]

You can not make more money by paying your employees more so they can buy your product.

The costs are 100% borne by you. Even if they took 100% of the money you gave them and spent it on your product (a wildly implausible outcome) your profit margin is usually no where near 100%.

Let's take an example: Suppose you raised your employees salaries $1,000,000. They spend X% of that on your product, and you have a Y% profit margin.

If X is 100% and Y is 100% you break even.

If X and Y have realistic values like, say, 5% and 10% you get $1,000,000 * 5% = $50,000 more revenue and $50,000 * 10% = $5000 more gross margin. So your costs went up by $1,000,000 and your margin went up by $5000. This is not "more profit".

So you fail to sell employee product x and recover nothing. Fine. With nobody able to afford your products, they don't sell and in fantasyland the company goes on to make a fortune selling products to nobody.

It was Ford's productivity gains, not increased pay that brought the cars down so people could afford them.

 

[dismal]

You can not make more money by paying your employees more so they can buy your product.

The costs are 100% borne by you. Even if they took 100% of the money you gave them and spent it on your product (a wildly implausible outcome) your profit margin is usually no where near 100%.

Let's take an example: Suppose you raised your employees salaries $1,000,000. They spend X% of that on your product, and you have a Y% profit margin.

If X is 100% and Y is 100% you break even.

If X and Y have realistic values like, say, 5% and 10% you get $1,000,000 * 5% = $50,000 more revenue and $50,000 * 10% = $5000 more gross margin. So your costs went up by $1,000,000 and your margin went up by $5000. This is not "more profit".

So you fail to sell employee product x and recover nothing. Fine. With nobody able to afford your products, they don't sell and in fantasyland the company goes on to make a fortune selling products to nobody.

Rage, rage against the math.

 

[Nice Squirrel]

So you fail to sell employee product x and recover nothing. Fine. With nobody able to afford your products, they don't sell and in fantasyland the company goes on to make a fortune selling products to nobody.

Rage, rage against the math.

What math?

 

[dismal]

Rage, rage against the math.

What math?

The math that says you don't make more money by paying your employees more so they can buy your product.

 

[Nice Squirrel]

What math?

The math that says you don't make more money by paying your employees more so they can buy your product.

But you did no math. You only stated it was true and the math was correct. There was no math.

 

[coloradoatheist]

The math that says you don't make more money by paying your employees more so they can buy your product.

But you did no math. You only stated it was true and the math was correct. There was no math.

He did do the math. To make money from giving your employees an extra $X then that means that your employers would have to spend $X + Y. How are your employees going to spend $X + Y on your products?

 

[dismal]

The math that says you don't make more money by paying your employees more so they can buy your product.

But you did no math. You only stated it was true and the math was correct. There was no math.

If you look carefully at the post you quoted earlier you will find there is some math. And the math says you don't make more money by paying your employees more so they can buy your product.

 

[ksen]

You can not make more money by paying your employees more so they can buy your product.

Good thing Ford, and by extension the OP, didn't make that claim.