In the wake of yesterday's news that Canada lost 46,000 jobs in December, it's instructive to consider what Henry Ford did one hundred years ago. He raised his worker's wage to five dollars a day -- double the going rate. Tony Sanger writes:
Ford was virulently anti-Semitic, anti-union and paternalistic, but he realized higher wages would reduce the turnover of workers, boost productivity and also ultimately increase demand for autos. And it was remarkably successful. Turnover plummeted, his company's profits doubled in two years, and with surging productivity and production, the price of a Model T Ford was cut in half in a decade -- from about $500 in 1914 down to $240 in 1925. At $5 per day, an autoworker had to work 100 days to earn enough to buy a Model T Ford in 1914 and less than 50 days to afford one in 1925.
Sharing capital with labour increased productivity. Compare that to what we've been told for the last thirty-five years:
For decades we've been told we need to increase productivity and competitiveness, we must work harder and smarter, be more flexible, cut taxes, reduce regulations, cut government spending, expand investor protection and "free trade" agreements and provide more incentives for business and entrepreneurialism.
It's called supply side economics. It has been Margaret Thatcher's, Ronald Reagan's and Stephen Harper's claim to fame. And we know where it leads. Overstimulating supply depresses demand. When Henry Ford raised his workers' wages, he stimulated demand for his product and increased productivity.
What we need, writes Sanger, are policies which stimulate demand:
Real wages must be increased, and no longer suppressed through wage freezes, expansion of a precarious and temporary labour force and attacks on unions. Collective bargaining rights need to be strengthened, minimum wages increased and measures put in place to control excessive compensation at the top.
Public spending should be increased, not just on infrastructure, but also in areas that increase the "social wage" and expand public services and push back against increasing corporate control. These include improved public pensions, social security, education, health care, affordable housing and public transit. A national early learning and childcare program modeled on Quebec's program could not only pay for itself, but also generate tens of thousands of jobs and allow more parents to engage productivity in the labour force. Meeting the challenge of climate change will require billions in investments, but will pay off in both jobs and economic activity in the short term and in a more efficient and sustainable economy over the longer-term.
Mr. Harper has been doing just the opposite. Like Pickett's charge, Harper's economic charge is an exercise in unadulterated stupidity.