This is exactly what Henry Ford did in 1914. He guaranteed the workers $5 per day for 8 hours of work. At a time, the standard work week was sixty hours, and Ford reduced it to forty. That put his minimum wage at 40 cents/hour. His production before the assembly line innovation was twelve cars in a month. The production time was about twelve hours per car. After the conversion to assembly line, the time per car was 93 minutes. There were 13,000 workers at the plant. (Gets out calculator). The cost to Ford for his labor went up $32,500 per DAY! But…Ford’s plant was making 260,000 cars in the year with his 13,000 workers, and the other manufacturers made 280,000 cars in the same year…but with 66,000 workers. Ford was making an average of 20 cars per worker. His competition was making 4.4 cars per worker.
Ford’s labor costs would have been in the general area of $16,900,000 per year…$5/day x 260 days/year x 13,000 workers. From what I understand, the standard wages for autoworkers was between $1 and $2 per day and 60 hour weeks. Ford’s competitors were spending about $41,000,000 per year to get 280,000 cars. Ford’s process cost was 20% of the cost of his competitors, so even doubling the wages didn’t bite into his bottom line. Further, think on this: The average price of the competition’s cars was over $1000 with some as high as $5000+. That would represent nearly 6 months to 2 years of the yearly wages average worker (outside of Ford’s shop). I got the prices from the 1914 Official Handbook of Automobiles. The Model T is not mentioned here. When the Model T was automated, Ford reduced the price to $440 in 1914, so that represented 88 DAYS of a worker’s wages. Wouldn’t it be cool to own something that you helped make? What affect do you think it would have on the profit margin?
Well, if the Model T was sold for $440 in that year and he sold all of them, 260K, He made $114,000,000 on the sales, and spent only $16,900,000 on the labor. The costs of the materials would be roughly the same for Ford and his competitors. The vast majority of the population at the time made between $1000 and $2000 per year. It is Twice the number of the people at the next level–between $2000 and $3000 per year. The idea of taking out a loan to buy a car was ludicrous.
Now we hear of Dan Price, a CEO that is reducing his own salary so his workers can get $70K per year. Dan Price made his own salary $70,000 and made his company’s minimum wage also $70,000. This is capitalism. In Dan Price’s words, “Since then, our revenues have tripled, we are a Harvard Business School case study, and our employees experienced a 10-fold increase in home buying.”
True capitalism is collaborative and cooperative. It comes from a philosophy of plenty, not scarcity. The system we have in place is industrialism where those in want are told that it is lonely at the top–that everything in life reflects the triangle model. This is a myth. There is plenty of money, plenty of food, plenty of medicine, plenty of work. It is to the advantage of ruthless and unscrupulous moguls for those beneath them to believe that everything is scarce and they should be grateful for work without a decent wage, insane costs for medicine, and investments that are not available to anyone but the rich. We must abandon the industrialist view!