Raise Wages With Lean Manufacturing, Not Legislation

Return to business basics, and everyone will prosper

President Obama’s State of the Union address called for an increase in the federally mandated minimum wage from $7.25 to $10.10 an hour. $7.25 an hour, or even $10.10 an hour, is an appallingly low wage for anybody in a modern industrialized country, but we can’t get a higher minimum wage through either legislation or collective bargaining.

“Fast Food: Henry Ford vs. the SEIU” offers some ways to achieve higher wages in the fast food industry. In fact, Quality Digest’s Kristine Bammert sent me an article that shows how Dick’s Drive-In has already proven it’s possible to pay $10 an hour along with benefits.

The route to higher wages is extremely straightforward, as Henry Ford pointed out more than 90 years ago in the first edition of My Life and Work (Kessinger Publishing reprint, 2003).

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To a large extent, I whole

To a large extent, I whole heartedly agree with your reasoning. The one problem that I see is that, with very few exceptions, increased revenue and profit rarely trickles down to the work force. Executive compenstaion will go up, return to investors will go up in the form of dividends and stock buy-backs, but little, if any, will be seen by the employees at large. Here in the U.S. we have seen huge increases in company profitibility and executive compensation. At the same time wages for the rest have stagnated.

There was a time when at many company's, if they did well, the workforce shared in some of the rewards resulting from the efforts of all that contributed. That is rarely true today. Success in business is what it is all about, sadly, greed has taken too large a role in who shares in the results of hard work and innovation.

Requires a square deal for all stakeholders

Henry Ford succeeded because he recognized that he needed the loyalty of his workforce. Frederick Winslow Taylor pointed out that soldiering (marking time, limiting productivity) is a natural consequence of the employer behavior you described.

And how did Henry Ford do in his career...

... he lived comfortably, but never made a fortune at the Ford Motor Company. He did not have a fortune to pass on to his decendents, and never endowed a huge charitable organization. In all seriousness, stock holders today would much rather have a nice quarterly dividend and risk "soldiering" of the workforce than pass up all that money. Labor markets are just like any other market - driven by perception of supply and demand. If employers believe the supply of qualified workers is low, they will raise wages. If they believe the supply is high, they will lower them. The same holds true for workers - belief that there are more, better jobs out there will lead to a demand for more money. Fear that there no other jobs available will lead to the acceptance of pay cuts. One goal of smart management will always be to convince workers that their current job is the best around, so they will want to stay until they are no longer needed. It might seem heartless, but it is the best way to keep the most qualified person in a position and pay them as little as possible. If management has done their job, the worker will be happy they have the job and work hard to keep it.

Raise Wages With Lean Manufacturing, Not Legislation?

Interesting how it is possible, even required, for the Fed to create and maintain 3% annual inflation thereby cheaping worker pay by federal policy but it is somehow impossible to legislate either a minimum wage adjustment for for federal policy induced pay cuts or equal pay for equal work. Seems like there might be some unstated but rather important assumptions and goals in Mr. Levinson's arguments.

Not Everyone Can See This

Great points made in this article. Simple economic concepts generally lead to the best approach that is favorable to all involved. Some would call that "fairness".

Unfortunately, our current Luddite in Chief has partially blamed unemployment on ATM's and airport kiosks among other technological advances. How is it possible to get this message out to a citizenry that is no longer taught nor understands these basic economic principles?

Great Article and Comments, too

Bill,

As usual, you make a great case for capitalism.

I respect the points made by the commenters. Success is a win-win proposition and the fruits of that success should flow to all who made it happen to include the owner(s), if a sole proprietorship or partnership or a corporation with management, shareholders, and a labor force.