Don Boudreaux of the blog Cafe Hayek lays waste to the long-standing urban myth, being used by some today to argue that greater government redistribution of wealth will spark economic growth, that auto pioneer Henry Ford more than doubled his workers’ pay to $5 per day so that they themselves could afford to buy his automobiles.
Ford raised workers’ wages for two reasons, neither of which had anything to do with raising consumer demand for his automobiles. The first reason was to reduce worker turnover. In 1913, the year before the $5 wage was announced in January 1914, the average Ford employee quit after less than four months on the job. A workforce so unstable and inexperienced prevented Ford’s factories from achieving peak efficiency.
Second, because the $5 wage was conditioned upon Ford’s workers learning English, as well as their steering clear of alcohol and gambling – conditions monitored by Ford executives visiting workers’ homes! – the higher wage was an incentive for workers to be more reliable and productive while on the job.
Ford came to understand by 1914, Boudreaux writes, that the key to economic growth was not in giving people stronger incentives to spend but, rather, in giving people stronger incentives to produce.
Talk about a rough day for shareholders. CommunitySouth Financial Corp., already struggling to keep its head above water, saw its stock fall more than 95 percent Wednesday, from $1.02 a share to just 5 cents.
CommunitySouth, the Easley-based parent of CommunitySouth Bank and Trust, has struggled the past two-plus years, losing more than $25 million, but there was little official news to explain Wednesday’s plunge.
The company issued no press releases and there were no filings with the US Securities and Exchange Commission. However, it was the type of event that makes one sit up and wonder if something bad is about to happen?