On a motorsport forum which I am on, the claim was made yet again that minimum wage laws should be abolished and that capitalism will always sort out what is fair because "the market is more moral than the government". Firstly, I have no idea why an amoral mechanism that allots things that are sold on the basis of prices and volumes is "more moral" than anything. Secondly, I have no idea why an amoral mechanism that allots things can be "more moral" than the application of law, when literally everyone participating in the market is selfish.
I find it even stranger that the claim is made that "the market is more moral than the government" when talking about minimum wage laws, when the person making that claim lives in the United States. The United States as a nation was started as a result of the chain-reaction of events that started with the legal case Somerset v Stewart (1772) that held that Englishmen could not be held as chattel goods, consternation in the American colonies, punitive taxation that resulted, then a war to throw off that punitive taxation. The United States as a result of fighting a war, kept the right to retain slavery.
Slavery is always done for profit. Slavery when viewed through the lens of capitalism also follows the same rules as other markets for labour. Of course if you can pay workers literally nothing, it is going to be profitable for the person in possession of control of that labour. Modern internships where people work for nothing and gain "experience" is also highly profitable for the person in possession of control of that labour; the reason why it is tolerated is because of voluntary contracts.
The truth is that labout has always had to fight for every concession ever made; this extends even back to the Roman Republic. It wasn't really until the modern industrial age, when the idea of combinations and unionism had to rise against factory owners who owned big machinery, that large scale industrial bargaining took place. Capitalism never sorts out what is fair because the premise that "the market is more moral than the government" is absurd.
The classic example which is always put forward at this point (and was put forward here, yet again) is the now famous tale that Henry Ford increased the wages of the assembly line workers at his factories from $2.25/day to $5.00/day to make sure that his workers could afford to buy Ford cars. This is a lovely tale which is used to suggest that minimum wage laws should be abolished and/or that capitalism is somehow lovely and moral. However any examination of what actually happened reveals that the story while containing small iotas of truth, is mostly rat viscera.
The assertion that assembly line workers at his factories from $2.25/day to $5.00/day is in fact factually wrong. That $5/day payment was really only made as a set of bonuses if the factory happened to meet the appointed quota set for it. Even if you accept that lie as a truth, that $5/day payment still happened to come with conditions and caveats anyway.
The ugly and unspoken truth is that Henry Ford made workers who were recent immigrants, attend lessons on how to be American and American values. Beyond military training, I honestly can not think of any modern American workforce that would be even willing to accept that kind of indoctrination and paternalism; in exchange for a 122% increase in wages. I have no idea what those "American values" were but if they were anything like Henry's, they were also anti-Semitic. As an aside, Henry Ford did receive awards from none other than Adolf Hitler himself because they saw eye to eye on the treatment of Jewish people and Ford kept the factories in Germany open, right through the establishment of the Third Reich and including the duration of the war.
Setting morality aside (because if were going to start with a faulty premise, we may as well ignore it), the most damning thing about putting forward the example of Henry Ford and his workers is that the pure maths simply doesn't support the premise.
There are 52 weeks in the year, and 5 days per week. 52 x 5 = 260 days
There were 14,000 workers in Ford's factories at the end of 1914.
Just the rise in daily wages from $2.25 to $5 is:
260 x 14,000 x $2.75 = $10,010,000
However, we have a problem.
The price of a Model T in 1913 was $550.
The price of a Model T in 1914 was $550.
If all 14,000 workers bought a car in 1914, at $550, then the revenue collected from selling Ford cars to Ford employees is:
14,000 x $550 = $7,700,000
It doesn't take an idiot to work out that paying about $10m in wages so that they can buy $7.7m worth of product is not great at increasing company profits. It is however, an excellent way to lose $3m. Besides which, there is simply no guarantee that once you place $715 per year into the hands of your workers, that every single one of them will then buy your product at retail rates.
The real reason why Henry Ford more than doubled the wages at his factories, was because the turnover rate was appalling, and he undertook a time and motion study to work out what level of wages were needed to avoid staff turnover. By cutting staff turnover, Ford could retain his workers. By cutting staff turnover, he could reduce training time of the labour force. Yes, in a few select circumstances, raising wages can reduce total labour costs but the suggestion that this was somehow moral or at all to do with creating a workforce that could afford to buy the products, is more rat viscera.
To reiterate that, the real reason why Henry Ford more than doubled the wages at his factories had to do with increasing production due to marginal improvements in productivity and massive reductions in staff turnover.
Here then, is the real underlying reason why Ford increased the wages of his workers.
Ford car production in 1913: 170,000
Ford car production in 1914: 202,000
The price of a Model T in 1913 was $550.
The price of a Model T in 1914 was $550.
This means that the value of the sales increase was worth $550 x (202,000 - 170,000) = $17,600,000
The other really obvious thing which is immediately forgotten if the example of Henry Ford is brought up when talking about minimum wage laws, is that the case of Henry Ford and his workers has exactly nothing to do with minimum wage laws. The first minimum wage law in the United States didn't exist until the National Industry Recovery Act in 1933 under President Roosevelt; even then the minimum wage was set at 25c/hr. That works out to be $2.00/hr and wages at Ford's factories in 1913 before the famous increase were already $2.25/hr.
Citing Henry Ford and his factories as an example that minimum wage laws should be abolished is simply nonsensical. Worse than that, it conveniently sidesteps the issue that given the chance, there are employers who would pay as little as possible (including nothing) if they can get away with it. Furthermore, it actually says something about the character of the person who wants to make the claim that workers do not deserve their wages. Minimum wage laws because people do get exploited. Minimum wage laws exist because people are treated badly. Minimum wage laws, along with laws to do with things like fire escapes, working hours, needing breaks, protective equipment in dangerous conditions, working with chemicals, only exist because people had to fight for dignity and in some cases people died. Granted that government often is as corrupt and as shifty as private enterprise but you would hope that government at least has the pretense of being accountable to the people. Private enterprise is not and does not have to be.
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