The Left Will Tell You That Raising the Minimum Wage Will Boost Productivity – Don’t Let That Fallacy Fool You
According to this fallacy, Henry Ford raised wages so as to increase productivity
The “newspaper of record” trots out this economic fallacy: “Perhaps the most famous illustration of the benefits [of higher wages stoking the sputtering engine of economic growth] is the story of Henry Ford’s decision in 1914 to pay $5 a day to workers on his Model T assembly lines. He did it to increase production — he was paying a premium to maintain a reliable work force. The unexpected benefit was that Ford’s factory workers became Ford customers, too.”
Who says so? What is the evidence that he did this so as to increase productivity? His own claim? Why believe him?
Were his workers starving and feeble before this great generosity of his? Of course not. And, even if this were true, it by no means follows that this is the royal road to profits.
From an economic point of view, even if this were the result, it would have been in spite of this “decision” of his, not due to it.
The best estimate of productivity, indeed the only one, is actual wages paid.
Of course, there are always errors in any market comprised of flesh and blood human beings. But the incessant hun
Article from LewRockwell