Henry Ford Was Right

[Nice Squirrel]

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.

But there are times when 100+617=717. and this is for all companies.

 

[Jimmy Higgins]

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.

They'll spend it locally and then the places where it was spent locally will have a little more and their workers can spend in at the 7/11. The world doesn't end outside the door of the store.

 

[Loren Pechtel]

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.

Exactly.

Work on Ford's assembly line was harder and riskier than at places doing it the old way, he had to pay more to keep workers. There has been a lot of words written trying to make a virtue out of this necessity but the reality is that it was a necessity.

 

[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.

They'll spend it locally and then the places where it was spent locally will have a little more and their workers can spend in at the 7/11. The world doesn't end outside the door of the store.

Some of it gets back, but it's not going to be the $8 per employee it spent. And that's if that business can sell more things, if not it has to jack the price up to make up for the additional expenses.

 

[dismal]

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.

Sales are not 100% profit, so they lose more than that.

 

[Nice Squirrel]

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

Exactly.

Work on Ford's assembly line was harder and riskier than at places doing it the old way, he had to pay more to keep workers.

Citation.

 

[fromderinside]

This caught my eye.

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.)

So I give you this from the interview:

In 1919, Ford raised his minimum wage again, this time to $6.00 a day. Again, the wage hike produced higher production numbers. Ford told Garrett, “The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made, and the six-dollar-a-day wage is cheaper than the five. How far this will go we do not know.”
He learned how far in 1929. In the aftermath of the stock market crash, he raised wages to $7.00 a day, hoping it would spark an economic recovery. But this time, it didn’t work. Orders fell, production slowed, hours were reduced. But Ford didn’t blame the workers for the sluggish economy. The fault lay in business leaders who were “continually putting the profit motive over what he called the wage motive.” Ford told Garrett, “When business thought only of profit for the owners ‘instead of providing goods for all,’ then it frequently broke down.”

This suggests that when market phlosophy is against one's interests that the market won't support those interests. Market philosophy was with Ford in 1914 and 1919. It was against him in 1929.

Obviously the math includes a worker's ability to be a customer, his wont to keep his job, the bias of the rest of the market's notion of what might work in a particular situation. Since the sentiment was not against him in 1914 and 1919 his gambit worked, productivity increased, tolerance for monotonous work increased, employees were part of his market, and other businesses benefited from extra ford employee money in the marketplace.

When the other companies were trying to save costs out of fear by laying off employees Ford's attempt to add money from his employees had little effect on the overall market. Its not principles here but fer based sentiment for saving ass that lead to motivating employees failing to impact market. It was the others who ignored demonstrated successful market principles. Fear is not a principle. Rather it is an impediment to applying principle.

 

[dismal]

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.

They'll spend it locally and then the places where it was spent locally will have a little more and their workers can spend in at the 7/11. The world doesn't end outside the door of the store.

Show me the math that says this would plausibly result in more profit to Ford.

Also, this "money rebounds through the economy" argument would seems to apply to any spending on anything. If instead of giving the employees higher wages Ford bought a massive new Yacht wouldn't that also result in money rebounding through the economy some of which would result in increased sales of Fords?

Wouldn't all this money rebounding about also result in higher sales of shoes, broccoli and cigarettes?

It seems like perhaps this rebounding effect is overstated else any spending on anything would cause the economy to spiral upward into massive levels of prosperity for everyone. What do you think stops the economy from spiraling wildly out of control every time somebody spends money?

Back in reality, it seems likely the increase in the overall economy from a given act of a little more spending is sufficiently diffuse that it is wildly implausible to think it would raise the profits of the person who bears the full direct brunt of the increased expenses.

Ford currently has about 200,000 employees. To keep the math easy let's estimate 100,000 of them are in the US and each of them makes $100,000 per year. This would put their total employees expense at about $10 billion. If they gave everyone a 100% raise, that would add $10 billion to the pockets of these employees. It would also take $10 billion from the pockets of someone else. But even if it didn't, that extra $10 billion is trivial in the context of a $17 trillion US economy. It's a whopping .05%. Before I deduct the spending that the people who are out that $10 billion. You need to be wildly delusional, clueless about math or both to believe the costs which are directly borne by you 100% will be offset by the ripples from this tiny little drop in the ocean.

 

[ksen]

I agree with dismal that only government can spend enough to get the economy moving in any meaningful way.

 

[dismal]

I agree with dismal that only government can spend enough to get the economy moving in any meaningful way.

Sure, once it discovers the fountain of money and scares off the unicorns protecting it.

 

[ksen]

The government can create money out of thin air. It's in the Constitution and everything. And the Constitution is magical . . . like a unicorn.

 

[ZiprHead]

Sure, once it discovers the fountain of money and scares off the unicorns protecting it.

Since the rich are richer than pretty much ever and corporate profits are at all time highs, I've got a pretty good idea of who's protecting the money fountains.

 

[dismal]

The government can create money out of thin air. It's in the Constitution and everything. And the Constitution is magical . . . like a unicorn.

Exactly, that's why we always have unbounded prosperity and no need for taxes. The awesomeness of money printing.

 

[coloradoatheist]

Sure, once it discovers the fountain of money and scares off the unicorns protecting it.

Since the rich are richer than pretty much ever and corporate profits are at all time highs, I've got a pretty good idea of who's protecting the money fountains.

The second part, corporate profits being high, is the other discussion. Why aren't businesses re-investing their profits?

 

[fromderinside]

The government can create money out of thin air. It's in the Constitution and everything. And the Constitution is magical . . . like a unicorn.

Exactly, that's why we always have unbounded prosperity and no need for taxes. The awesomeness of money printing.

No. Bureaucrats are optimists. We print money, add it to our debt deposit it in banks expecting them to lend this virtually cost free money at reasonable rates to borrowers with good ideas for products. the banks don't do this. They hold on to it to protect their miserable butts from regulations designed to prevent them from failing. When the do lend it is at terrifically high rates compared to inflation with severe restrictions and hooks on the borrowers demanding a piece of whatever they make.

Had the banks lent the money given them our economy would be bursting at the seams by now.

If you need proof just look at what happened when the FED didn't raise rates last week. Instead of cheering lower costs for borrowers investors had a hissy fit over not getting free a new profit devise. No care for better economy where all gain, just looking after their own arses as usual.

 

[maxparrish]

Ahhh, yet another thread with a bilge full of fictional "facts", and dialogs of economic gibberish. Why do the usual suspects vex us with another thread of repeatedly debunked fairytales?

Given the stable sized manure pile of the OP and its consumers, it will take a while to clean up this mess. So let's start with correcting the history:

Anyone familiar with early 20th century business history knows that the era was one of very rapid economic growth and high turnover of employees. With Few regulations, and little government or union power, employers were able to hire freely without fixed labor costs. The economic flexibility (and social mores) of the period created a more liquid (and unstigmatized) market for wage labor. Employers could easily terminate employment, and workers had little reason to "cling" to a job if unhappy.

So it is no surprise that the high rates of turnover in the early years was closely linked with worker-initiated job changes, e.g; 70 percent of all changes in employment (1910-1920) were from quits.

However, employers in the 1920s started to realize that by strengthening the attachment of the worker to the employer through h would benefit them; hence, they instituted on-job training, seniority pay, seniority benefits, and internal promotion laddering. The number of quits dropped dramatically in the 1920s, before the Great Depression. (Moreover, the ending of generous immigration rules made industrial labor more scarce, also resulting in wages and benefits increases.)

Ford may have claimed he was just being an altruist but the reality is he (like many employers) realized they had no choice if they were to retain the labor they needed.

http://www.forbes.com/sites/timwors...y-fords-5-a-day-wages-its-not-what-you-think/

 

[Jayjay]

Henry Ford is entitled to his opinion, but it doesn't necessarily make it right.

 

[fromderinside]

Ahhh, yet another thread with a bilge full of fictional "facts", and dialogs of economic gibberish. Why do the usual suspects vex us with another thread of repeatedly debunked fairytales?

Given the stable sized manure pile of the OP and its consumers, it will take a while to clean up this mess. So let's start with correcting the history:

Anyone familiar with early 20th century business history knows that the era was one of very rapid economic growth and high turnover of employees. With Few regulations, and little government or union power, employers were able to hire freely without fixed labor costs. The economic flexibility (and social mores) of the period created a more liquid (and unstigmatized) market for wage labor. Employers could easily terminate employment, and workers had little reason to "cling" to a job if unhappy.

So it is no surprise that the high rates of turnover in the early years was closely linked with worker-initiated job changes, e.g; 70 percent of all changes in employment (1910-1920) were from quits.

However, employers in the 1920s started to realize that by strengthening the attachment of the worker to the employer through h would benefit them; hence, they instituted on-job training, seniority pay, seniority benefits, and internal promotion laddering. The number of quits dropped dramatically in the 1920s, before the Great Depression. (Moreover, the ending of generous immigration rules made industrial labor more scarce, also resulting in wages and benefits increases.)

Ford may have claimed he was just being an altruist but the reality is he (like many employers) realized they had no choice if they were to retain the labor they needed.

http://www.forbes.com/sites/timwors...y-fords-5-a-day-wages-its-not-what-you-think/

maxperrish. You need to set your clock better. Ford did his thing in the teens, not the twenties. Those cynics who followed Ford's initiative in the twenties only saw benefits from retaining workers and nothing else. It turns out Ford did more than raise salaries, he trained employees, provided for education, started retirement plans. Most companies in the twenties, other than Ford, still gave a handshake, a cheap watch, and a kick in the butt to those they wanted retired. Too bad your watch started about 7 years too late. Otherwise your take (liar's weasel twisting of events) might even seem rational.

 

[fromderinside]

Henry Ford is entitled to his opinion, but it doesn't necessarily make it right.

No one said Ford had divine qualities. He just got the business system math worked out correctly.

If you want to tar him. Create a thread.

 

[coloradoatheist]

Ahhh, yet another thread with a bilge full of fictional "facts", and dialogs of economic gibberish. Why do the usual suspects vex us with another thread of repeatedly debunked fairytales?

Given the stable sized manure pile of the OP and its consumers, it will take a while to clean up this mess. So let's start with correcting the history:

Anyone familiar with early 20th century business history knows that the era was one of very rapid economic growth and high turnover of employees. With Few regulations, and little government or union power, employers were able to hire freely without fixed labor costs. The economic flexibility (and social mores) of the period created a more liquid (and unstigmatized) market for wage labor. Employers could easily terminate employment, and workers had little reason to "cling" to a job if unhappy.

So it is no surprise that the high rates of turnover in the early years was closely linked with worker-initiated job changes, e.g; 70 percent of all changes in employment (1910-1920) were from quits.

However, employers in the 1920s started to realize that by strengthening the attachment of the worker to the employer through h would benefit them; hence, they instituted on-job training, seniority pay, seniority benefits, and internal promotion laddering. The number of quits dropped dramatically in the 1920s, before the Great Depression. (Moreover, the ending of generous immigration rules made industrial labor more scarce, also resulting in wages and benefits increases.)

Ford may have claimed he was just being an altruist but the reality is he (like many employers) realized they had no choice if they were to retain the labor they needed.

http://www.forbes.com/sites/timwors...y-fords-5-a-day-wages-its-not-what-you-think/

maxperrish. You need to set your clock better. Ford did his thing in the teens, not the twenties. Those cynics who followed Ford's initiative in the twenties only saw benefits from retaining workers and nothing else. It turns out Ford did more than raise salaries, he trained employees, provided for education, started retirement plans. Most companies in the twenties, other than Ford, still gave a handshake, a cheap watch, and a kick in the butt to those they wanted retired. Too bad your watch started about 7 years too late. Otherwise your take (liar's weasel twisting of events) might even seem rational.

While I agree...you can make a decision for one reason and then 10 years later re-rationalize your decision a different way. The only way to know is to find any documentation for the decision at the time.