I’ve been attacked by Michael Lind! Woot!
Let’s focus, instead, on Worstall’s factual claim: “Those at or near the minimum wage … are generally the consumers of things made by other low-paid, minimum-wage workers.”
Is this true, as a matter of fact? A century ago, the term “Fordism” referred to the system in which Henry Ford’s auto-manufacturing employees and other industrial workers could afford to buy the products they made. Most jobs today in contemporary developed economies like the United States and Britain are in the service sector, not in the factory sector. Do we really live in a system of service-sector Fordism, as Worstall claims? Is it really the case that most of the consumers of goods and services produced by low-income workers are other low-income workers?
Well, no. Fordism isn’t that, Fordism is mass manufacturing using interchangeable/standardised parts etc. Plus, Ford’s workers being able to afford Ford’s cars – that’s getting dangerously close to the stupidity of thinking he raised wages to $5 a day so that they could. A stupidity first really pointed out by, umm, me.
Had Worstall, a senior fellow at the London-based Adam Smith Institute, ,…….Year after year, decade after decade, generation after generation, libertarian pseudo-scholars in pseudo-think tanks and pseudo-academic programs are paid by rich donors to repeat the same trite talking points that have changed little since the days of Friedrich von Hayek, Ayn Rand, and Milton Friedman. At the same time, there is little or no funding for scholars on left, right, or center who can refute the pseudo-scholarship of the well-funded libertarian propaganda apparatus. I wonder why.
Of course, the ASI is an unpaid position. Lind is a well paid professor:
He is currently a professor at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin.
Etc, etc. But then Paul Krugman had Lind down decades back:
One of America’s new intellectual stars is a young writer named Michael Lind, whose contrarian essays on politics have given him a reputation as a brilliant enfant terrible. In 1994 Lind published an article in Harper’s about international trade, which contained the following remarkable passage:
“Many advocates of free trade claim that higher productivity growth in the United States will offset pressure on wages caused by the global sweatshop economy, but the appealing theory falls victim to an unpleasant fact. Productivity has been going up, without resulting wage gains for American workers. Between 1977 and 1992, the average productivity of American workers increased by more than 30 percent, while the average real wage fell by 13 percent. The logic is inescapable. No matter how much productivity increases, wages will fall if there is an abundance of workers competing for a scarcity of jobs — an abundance of the sort created by the globalization of the labor pool for US-based corporations.” (Lind 1994: )
What is so remarkable about this passage? It is certainly a very abrupt, confident rejection of the case for free trade; it is also noticeable that the passage could almost have come out of a campaign speech by Patrick Buchanan. But the really striking thing, if you are an economist with any familiarity with this area, is that when Lind writes about how the beautiful theory of free trade is refuted by an unpleasant fact, the fact he cites is completely untrue.
Hmm.
As to the original claim, the low paid are generally consumers of things made by the low paid. So, wages are higher at Whole Foods than they are at Dollar Tree. The poor and low paid are shopping at Whole Foods or Dollar Tree? At Maccie Ds or that chi chi organic burger joint? Wages are higher in the Target clothing section or Nordstrom?
So, Lind again:
If Worstall is correct, then “the consumers of things made by other low-paid, minimum-wage workers” must be “at or near the minimum wage.” If this were true, then most of the customers who are checked out in stores by cashiers would make no more than the cashier on average. Most janitors and building cleaners would be paid more or less the same as all of the office workers in buildings which they clean. And if service-sector Fordism were real, then maids on their salaries could afford maids for their own homes, in an economy in which workers literally did one another’s laundry.
Which is, as you can see, entire bollocks. I stated that the low paid – for convenience let us say those on min wage – are generally consumers of things made by other low wage people. I did not say that things made by low wage workers are generally consumed by low wage people which is the twist Lind tries to apply. Given that min wage workers are 2% or so of the entire US workforce Lind’s version would be tough. Mine is easy.
Still, P Krug seems to have got him right those decades back, no?
This kind of brazen promulgation of an obvious falsehood is typical of libertarian propaganda, which is a mishmash of dubious assertions and outright lies:
Projection much?
pseudo-scholars in pseudo-think tanks and pseudo-academic programs are paid by rich donors to repeat the same trite talking points that have changed little since the days of Friedrich von Hayek, Ayn Rand, and Milton Friedman
Damn Pseuds and their… principled support of individual freedom, liberty and prosperity.
Low paid workers will buy products made by low paid workers in other countries.
Lind is only now commenting on an article published in 2014! And after all that time still doesn’t understand it.
Hmmm, I see he is in my podcast queue being interviewed by Brendan O’Neill. O’Neill’s gone off the boil recently and if this is the standard of fare I’ll be served I Think I’ll save that 1 hour 20 minutes when I’m out hiking for someone else.
“Lyndon B. Johnson School of Public Affairs”
Hey, hey, LBJ, how many fools do you employ today?
Had to look this goof up to find out who he is…
And he’s exactly what I expected him to be; a highly educated and credentialed academic who has never had a real-world job in his life. Just another blowhard who’s never done anything but has the answer to everything.
Probably drives a Chevrolet.
The final sentence. I’d substitute delusions for outright lies, but seems fair enough.
Brilliant presentation of the key points by Tom: a 3-way wrestle between classical, malleable and scum liberals lovingly described.
‘Plus. Ford’s workers being able to afford Ford’s cars – that’s getting dangerously close to the stupidity of thinking he raised wages to $5 a day so that they could. A stupidity first really pointed out by, umm, me.’
Tim pointed out that raising wages to get workers to buy your products is not profitable.
Quite, mathematically it couldn’t be, that much is obvious. Spending X dollars to get some percent less than 100 of those dollars back is going to be a loss.
But Ford did raise wages so his workers could afford his cars. He was idealistic to a fault, several major faults really. And Fordism should probably be defined by his idealism more than his assembly line ideas.
That move resulted in Dodge vs Ford in 1919, and established the doctrine of shareholder primacy in US law. Legally shareholder profits had to come before raising wages or lowering costs, and it’s been that way ever since.
But Ford is the man that said ‘thats enough profit thank you, it’s time to lower costs and raise wages’. Whatever your opinion of that, or any of his other wild misadventures, he did it.
‘As to the original claim, the low paid are generally the consumers of things made by the low paid’
I think both parties are off the mark of this one. Low paid workers primarily consume things made by high paid workers. I know ranchers that get 20 million dollar checks on the regular. Then the truckers and meat packers get good wages. The ones getting poor wages are the end guys at the grocers or fast food place that don’t add that much value to the chain. But poor blokes are the ones consuming the burgers etc the well off rancher produced.
It’s the same way with everything isnt it? The well paid miner produces so of what they’re mining that poor folk can afford it.
The movies are consumed by the poor and produces by the rich.
If anything the middle class and lower rich class far outproduce what they consume, and the lower wage earners consume more than they produce.
Linds thing about maids is off the mark too. The local maid services I know of pay their people by commission and they expect a lot out of them. If one of their maids wanted too they certainly could afford to hire their own company to clean up their place once or twice a month. Probably wouldn’t want too for the same reason a plumber wouldn’t hire another plumber to fix their own sink. But they could, if they did want too.
And that’s what Fordism as Lind sees it is about isn’t it? A worker can afford to buy a bit of the thing they produce. It seems to me that’s ubiquitous, so Lind has nothing to bellyache about. The service industries can all afford their own services. A waiter by tips alone can eat at their own restaurant, a stadium worker can see a ballgame, theater staff can afford to go see a movie.
So all’s well even by Linds own standards, no?
Classic lefty tactic of just making shit up. No surprise there.
“But Ford did raise wages so his workers could afford his cars. He was idealistic to a fault, several major faults really. And Fordism should probably be defined by his idealism more than his assembly line ideas.”
No, that’s nonsense too. Ford raised wages to reduce worker turnover. The costs of selection, hiring and training were such that he made more money by paying higher wages and having lower turnover of staff.
Tim is right; that is the generally agreed reason. But a second reason is often also cited. The Dodge brothers were both shareholders in Ford and component suppliers to the company. Henry Ford feared that if they could accumulate enough capital they would start a rival car company.
Well, sorta. Back 15 years or so the generally accepted – even on the Ford website – idea was that he paid $5 a day so that his workers could afford his cars. One of the few pieces of actually innovative journalism I’ve done was exploring this idea at Forbes and showing that it simply could not have been true. So, worker turnover is now more generally accepted as the explanation. I’m only partly responsible for that change but partly responsible is still partly responsible.
Being poor and being a low paid worker are not the same Grey. There’s bound to be an overlap, but there are many poor who do not work, and many two earner nuclear families on minimum wage (maybe 3 if junior works) who would not consider themselves poor but are low paid workers.
The analysis has to be on point – low paid at or near minimum wage workers.
As a generalisation they travel by bus and not train, holiday on Easyjet and not British Air.
Don Boudreaux has rushed to your defence: https://cafehayek.com/2023/05/michael-lind-slays-a-minimum-wage-straw-man.html
‘No, that’s nonsense too. Ford raised wages to reduce worker turnover. The costs of selection, hiring and training were such that he made more money by paying higher wages and having lower turnover of staff.’
But this is based on assumption that his actions had rational and self interested motives. Ditto to KJPs assertions that he would hurt his own share price to stifle competition. They look at some of the results of his actions that turned out in a such a way as to incidentally help him and stage the whole thing as if he planned it that way. Like he was the proverbial chess player while everyone else played checkers.
But the whole argument is the cart before the horse. Ford was a good engineer and a good manager and terrible with all things finance. We see this from his own books and the writings of those around him. He raised wages based on his ideals and noted several years downstream that this happened to reduce turnover. All this can be read in his own autobiography in the chapter entitled ‘wages’.
‘The large wage had other results. In 1914, when the first plan went into effect, we had 14,000 employees and it had been necessary to hire at the rate of about 53,000 a year in order to keep a constant force of 14,000. In 1915 we had to hire only 6,508 men and the majority of these new men were taken on because of the growth of the business.’ et cetera. This is talking about the move to 6$, not the 5$ plan, so it took him a number of years to cotton onto the employee retention aspect of higher pay.
So yes, it did reduce turnover. But Ford didn’t know that it would beforehand, he didn’t even know this would matter because he didn’t anticipate how fast his company would grow. He didn’t realize he would need to reduce turnover. The success of the Ford motor company was a shock to him more than anyone else. He could not have raised wages to reduce turnover because he didn’t even know it would have that effect nor that he would need that effect.
This is Fordism related to wages:
We have made changes in the system, but we have not deviated from this principle:
‘If you expect a man to give his time and energy, fix his wages so that he will have no financial worries. It pays. Our profits, after paying good wages and a bonus—which bonus used to run around ten millions a year before we changed the system—show that paying good wages is the most profitable way of doing business.’
And in conjunction with this: “I will build a motor car for the great multitude…constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise…so low in price that no man making a good salary will be unable to own one-and enjoy with his family the blessing of hours of pleasure in God’s great open spaces.”
Yes Ford wanted his workmen to be able to afford his cars. And yes the wage hike (well, profit sharing scheme) was part of that.
Now we can ask if Fordism is a good thing, and I’d say probably not as good as it appears. But I’m rather against revising our view of history with the assumption that folks in the past had perfect future knowledge of the outcomes of their actions. Least of all Ford, if you all want to paint him as a scheming genius ten steps ahead of the crowd explain the peace ship to me. Yes some things he did worked out, or could have worked out, and some things were total nonsense. It’s a disrespect to Ford to discount just how mad and idealistic he was.
That said almost the whole thing can be found in one chapter of his autobiography, wage/profit trade-offs and all. Not a bit of this is new news now is it?
I mean if they were claiming he raised the wages to directly increase revenue by increasing sales to employees of course it’s nonsense. But I can’t imagine that was anyone’s idea. It’s more complex than that. But then it’s right there in his own writing, so no one could have reasonably missed it.
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Bongo
Sure but wots that got to do with it?
Lind claimed that service sector workers couldn’t afford their own services and that was bad for reasons. That shows he has no idea what the service sector is paid. Even if that was innately bad (I don’t think it is) it’s not true anyway. Per his example: Maids can afford maids if they want too. At least if they work for a decently efficient maid company with lots of clients.
Tim seemed to concede that low paid workers consume things low paid people make. That’s not true either, everyone from the rich to the unemployed consume mainly what efficient and profitable well paying business make in bulk. Offshore sweatshops being the exception to that rule.
Entertaining to look up the peace ship Grey. Evidently the media back then were more willing to ridicule bullshit.
One has only to look at the ridiculous pretence that the ‘international community’ can stop the Sudanese killing each other to see how far we’ve deteriorated.