Happy Labor Day! Now Get Back to Work
Ah, Labor Day: in America the official end of summer – well, if you’re a school kid living up North, anyway.
But as we stoke the fires for this year’s family barbecues, I hope you take a moment with me to consider something from a century ago almost to the day; something I never thought would be relevant to us in the Twenty-first Century. I wish I’d been right on that account.
In 1913, Henry Ford opened his first factory equipped with an assembly line, and he made history. A few months later he doubled the daily wage for his workers, from $2.50 a day to $5. With that bold stroke, he made history again.
As Ford himself frequently pointed out over the rest of his life, this decision to double his factory’s rate of pay greatly expanded the middle class. Before this, most Americans were poor, and a tiny number were rich. The spark Ford lit in Michigan started a fire that spread across the country.
Now, if you buy Ford’s own story, he did this so his workers could afford to buy the cars they built. More buyers allowed his factories to work at full capacity, which allowed him to lower the price of each car, creating a virtuous circle of rising wages and sustaining consumerism. His suppliers and competitors had to raise their wages to match his, in order to attract or keep workers of their own, so the cycle fed itself.
But the truth is more interesting. When Ford opened his first assembly line, the work was so mind-numbingly dull that his workers quit faster than he could hire and train their replacements. He was literally in danger of going bust because he had too little labor to fill orders. So he doubled his wage, and people stayed – despite the depressing, soul-quashing work. The outflow of workers turned around so effectively that overnight he had his pick of the employment pool.
He was right about the rest of his story: other employers were forced to raise their wages, too. American workers could, finally, afford to buy things. His decision did, truly, establish our vast middle class.
Which brings us to today. 15% of the US population is under the official poverty line of $23,021 for a family of four. Think about that number for a minute: four people living for the whole year on $23 thousand. Economists often cite something called the “twice poverty” number to give a more realistic view of who is really poor, officially or no. That number (four people living at $46 thousand per year) is 33.9% – one third of us.
A lot of the good achieved in the Twentieth Century is unwinding or has unwound in recent years
It seems that a lot of the good achieved in the Twentieth Century is unwinding or has unwound in recent years. For now, I leave you with these questions:
100 years ago, a Capitalist doubled what he paid his workers, and he grabbed the cream of the crop as a result. His company prospered. The entire economy prospered. It was a virtuous circle, although not undertaken for reasons that were all that virtuous.
How do we kick off a command performance? Who will step up to do it?
And what will happen to us all if no one does?
Image credit: yearah / 123RF Stock Photo