Henry Ford Was Right

[coloradoatheist]

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.

But not all companies can do anything about it, and as I said, the best thing Ford did was drastically increase his production, not his pay. So Wal-Mart to get its return would have to get a lot more production out of its work force for paying the higher wages. It is a strategy that Wal-Mart is looking at.

 

[laughing dog]

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

How did those productivity gains come about without workers showing up, staying healthy and producing more per hour? You make it seem like he had some magic wand or something.

 

[dismal]

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.

Great, then I'm sure no one will attempt to argue it does. And I'm sure the OP article does not say things like:

Ford’s $5.00-a-day policy helped the company achieve record profits. It made its cars affordable to its workers (who could purchase a Model T with four months’ wages.)

 

[Nice Squirrel]

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.

I see no math. I only see a thought experiment. Please show your work.

 

[coloradoatheist]

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

How did those productivity gains come about without workers showing up, staying healthy and producing more per hour? You make it seem like he had some magic wand or something.

It was from the assembly line and keeping the workers that were on the assembly line. Paying more can make the workers productive, but the idea as dismal pointed out, it's not to pay the workers more so they can just turn around and buy your product.

 

[coloradoatheist]

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.

I see no math. I only see a thought experiment. Please show your work.

I did..For a company to make the money on paying more that person would have to spend $X(raise increase) + Y(profit) to make money on just increasing the wage.

 

[ksen]

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

Great, then I'm sure no one will attempt to argue it does. And I'm sure the OP article does not say things like:

Ford’s $5.00-a-day policy helped the company achieve record profits. It made its cars affordable to its workers (who could purchase a Model T with four months’ wages.)

Which still isn't what you are arguing that they are claiming:

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

- - - Updated - - -

How did those productivity gains come about without workers showing up, staying healthy and producing more per hour? You make it seem like he had some magic wand or something.

It was from the assembly line and keeping the workers that were on the assembly line. Paying more can make the workers productive, but the idea as dismal pointed out, it's not to pay the workers more so they can just turn around and buy your product.

Which is not what the article or the OP were claiming.

 

[coloradoatheist]

Great, then I'm sure no one will attempt to argue it does. And I'm sure the OP article does not say things like:

Ford’s $5.00-a-day policy helped the company achieve record profits. It made its cars affordable to its workers (who could purchase a Model T with four months’ wages.)

Which still isn't what you are arguing that they are claiming:

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

- - - Updated - - -

How did those productivity gains come about without workers showing up, staying healthy and producing more per hour? You make it seem like he had some magic wand or something.

It was from the assembly line and keeping the workers that were on the assembly line. Paying more can make the workers productive, but the idea as dismal pointed out, it's not to pay the workers more so they can just turn around and buy your product.

Which is not what the article or the OP were claiming.

Then please summarize what you think the OP and the article were claiming

 

[dismal]

Great, then I'm sure no one will attempt to argue it does. And I'm sure the OP article does not say things like:

Ford’s $5.00-a-day policy helped the company achieve record profits. It made its cars affordable to its workers (who could purchase a Model T with four months’ wages.)

Which still isn't what you are arguing that they are claiming:

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

- - - Updated - - -

How did those productivity gains come about without workers showing up, staying healthy and producing more per hour? You make it seem like he had some magic wand or something.

It was from the assembly line and keeping the workers that were on the assembly line. Paying more can make the workers productive, but the idea as dismal pointed out, it's not to pay the workers more so they can just turn around and buy your product.

Which is not what the article or the OP were claiming.

Well, I suppose there's little point in arguing over this as long as we are in agreement it's wrong. Maybe you can explain it to squirrel.

 

[T.G.G. Moogly]

You guys are omitting population. You gotta keep popping out more and more kids for that type economic consumption to work. If population ceases to increase you need to find another model because Ford's is out the window in both cases.

 

[marc]

The 'mathematical proof' appears to be of same line of thought as the one saying the second law of thermodynamics disproves evolution. Treating the car company as an isolated system to be the only factor in the economy, rather than part of a larger system.

 

[ksen]

Then please summarize what you think the OP and the article were claiming

Ok.

“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.”

The gist of which is: instead of relentlessly trying to pay as little as possible to employees companies should try to pay as much as possible to employees while keeping other costs and prices as low as possible.

Ford understood that as much money as possible circulating through the most hands as possible produces a healthy economy.

You correctly point out that increased productivity is what led to Ford's success. But you can't separate Ford's wage policies from his other productivity increasing policies. Not only did Ford double the daily pay he also shortened the work day from 9 hours to 8 hours.

A year later Ford nearly doubled his auto sales. He raised daily wages by another dollar in 1919 and by 1920 was selling about a million autos a year.

So of course he wasn't relying on just his employees buying his cars as you and dismal have been arguing. He was arguing that paying the highest wages possible made cars more affordable for his workers and more affordable for the businesses his employees spent that money on as they had more money too.

 

[dismal]

Ok.

“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.”

The gist of which is: instead of relentlessly trying to pay as little as possible to employees companies should try to pay as much as possible to employees while keeping other costs and prices as low as possible.

Ford understood that as much money as possible circulating through the most hands as possible produces a healthy economy.

You correctly point out that increased productivity is what led to Ford's success. But you can't separate Ford's wage policies from his other productivity increasing policies. Not only did Ford double the daily pay he also shortened the work day from 9 hours to 8 hours.

A year later Ford nearly doubled his auto sales. He raised daily wages by another dollar in 1919 and by 1920 was selling about a million autos a year.

So of course he wasn't relying on just his employees buying his cars as you and dismal have been arguing. He was arguing that paying the highest wages possible made cars more affordable for his workers and more affordable for the businesses his employees spent that money on as they had more money too.

The idea that you can pay more to employees to get better more productive employees is not even slightly controversial. (Note: this is not the same as saying you should pay employees "as much as possible" - you would want to pay them the amount that optimizes the amount of production per dollar spent.)

However, we can easily observe this can be argued without any references at all of any kind to employees being customers for your product. So, if that is the argument I'm not sure why someone making that argument would be talking about employees being customers. It could be a sign they are arguing something else.

 

[Nice Squirrel]

I see no math. I only see a thought experiment. Please show your work.

I did..For a company to make the money on paying more that person would have to spend $X(raise increase) + Y(profit) to make money on just increasing the wage.

So let's say x=2 and y=4 that would mean wage increases are 6.

So the answer is 6.

Good job.

Or was there some actual math other than simple addition you were trying to show?

 

[coloradoatheist]

The 'mathematical proof' appears to be of same line of thought as the one saying the second law of thermodynamics disproves evolution. Treating the car company as an isolated system to be the only factor in the economy, rather than part of a larger system.

It still relies on the company knowing the money can get back to them. It's the hope that paying your employing that $X dollars is spent at the liquor store who then paying the $x + y profit for the company to make any money. But a company has to know its flow to expect that and they can't.

 

[Jimmy Higgins]

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.

More like since 2000, and especially true since a 2008. Squeeze every single ounce of work from your full-time staff that survived the '08 layoffs. And if necessary hirer temp workers to pick up the scraps.

 

[coloradoatheist]

I did..For a company to make the money on paying more that person would have to spend $X(raise increase) + Y(profit) to make money on just increasing the wage.

So let's say x=2 and y=4 that would mean wage increases are 6.

So the answer is 6.

Good job.

Or was there some actual math other than simple addition you were trying to show?

Huh?

If I am the owner of 7/11 and I pay an employee $80 dollars a day and I say, "I'm going to pay them $88 dollars a day to increase profits" it won't work because the employee isn't going to spend the $8.50 extra in my store.

 

[Nice Squirrel]

So let's say x=2 and y=4 that would mean wage increases are 6.

So the answer is 6.

Good job.

Or was there some actual math other than simple addition you were trying to show?

Huh?

If I am the owner of 7/11 and I pay an employee $80 dollars a day and I say, "I'm going to pay them $88 dollars a day to increase profits" it won't work because the employee isn't going to spend the $8.50 extra in my store.

So in your math example x=8 and y=0; 8+0=8

The answer is 8.

 

[coloradoatheist]

Huh?

If I am the owner of 7/11 and I pay an employee $80 dollars a day and I say, "I'm going to pay them $88 dollars a day to increase profits" it won't work because the employee isn't going to spend the $8.50 extra in my store.

So in your math example x=8 and y=0; 8+0=8






The answer is 8.

For most companies, X is 8 and y is -8. At best y might be -6. So I am going to spend 8 dollars to have 2 more in sales. The business lose $6 per employee.

 

[ksen]

So in your math example x=8 and y=0; 8+0=8

The answer is 8.

For most companies, X is 8 and y is -8. At best y might be -6. So I am going to spend 8 dollars to have 2 more in sales. The business lose $6 per employee.

Unless that 8 results in other cost saving measures along with more sales from people that now have more money buying stuff from you since your employees are spending more money with them.

"All else being equal" is great for teaching basic concepts but real world economics is not a basic concept and doesn't operate on "all else being equal".