Saturday, April 11, 2015


Don Boudreau in his regular Blog (9 April) HERE  raises an important fact from economic history, which is correct in what it criticises. You should follow the link for the economics of Don’s valid criticism:
“Crazy yet Immortal Economic Myths: Example no. 1”
To justify raising the minimum wage, Gary Jimenez alludes to the tale that in 1914 Henry Ford raised his workers’ pay to $5 per day so that he would earn more profits by dint of his workers spending their higher incomes on new Ford cars (Letters, April 9).  This tale is a myth.  Were Mr. Jimenez a better student of history he would know that Ford raised his workers’ pay in order to reduce worker turnover in his factories.”
Don provides the appropriate link to Tim Worstall’s post HERE  I hope readers follow the link to the academic rebuttal of Garry Jimenez’s fallacy, as picked up by Don.
My first job in Australia was at a car-manufacturer’s brand-new plant, then under construction and nearing production. I was assigned to the stores issuing tools and machine parts, tools, and accessories to the mechanics in exchange for authorisation chits signed by their foremen, and was also generally engaged in ”run about” message-taking across the production and administrative buildings.
I also looked round the manufacturing plant’s vast production lines, then partly busy with mechanics readying them for car production, between trips from the stores to deliver urgent items to the teams of mechanics, en route passing by notices banning photographs and showing my pass at ‘No Entry’ signs etc., and also dodging vigilant and surly security men. My interest was from pure curiousity and wonder and my sometimes unauthorised visits to departments which were in aid of my rushing delivery of urgent parts to 'friends' of stores. 
Over time I got to know many people and chatted about the wonders of modern car manufacture. One thing was made very clear to me that when the plant started producing cars it was to be a two-shift, non-stop operation geared to the demand for domestically produced cars (desgned and as operated in the UK - always referred to as ‘England’, never ‘Britain’). 
Recruitment of the line-workers and supervision were underway and training teams were everywhere. Many ‘Poms”- Australian slang for ‘English’-born migrants - had come over to Sydney on two-year contracts and were fairly open to loose conversation. I listened to the experienced migrant car workers and their accounts of what car manufacturing was like to work for in the UK. They all said that the pay was good but the work relentless. Whatever else happened the ‘line’ had to be kept moving. Stopping the ‘line’ was too serious to contemplate and they would recount stories of someone dying of a heart attack who was moved to the side while his place was taken by a ‘charge hand’ (lowest grade of supervision) and medics removed his body. Now this was my early experience of workers’- banter, partly made-up and grossly exaggerated to impress the innoncent (I was just 15).
But the image stuck with me, until years later, as a ‘mature’ student at  University in Scotland, I came across the story of Henry Ford’s raising of car-producers’ wages well above prevalent average workers’ pay rates, as if it was unexplainable. It did not strike me as odd or worthy of too much scepticism. I simply thought of those new Australian car production lines, plus all of their feeder lines of parts, large and small, simple and complex, all critical to produce a finished unit of output. 
The daily unit-output of completed cars was a critical indicator of performance. Anything that interrupted the flow of car bodies along those lines was a serious deficiency of hourly/daily output. The backlog of the flow of parts into and out of the stores was a visible rising cost of production for every minute of any idle time during working shifts, raising the unit costs of unfinished cars and causing the idle non-productivity of line labour, which struck at the profitability of the car-plant. 
Paying labour on stopped production lines because of the regular non-availability of labour from irregular absences was more expensive than paying higher wages, well-above the national norm to ensure, or at least mitigate, a much smaller scale of absences (closer to zero), so it made sense to set and keep the hourly rate high enough to ensure regular attendance. This all seemed logical to me aged 15 in a new Australian carplant, long, long before I went to university to study economics, aged 25. 
Gary Jimenez did not really need to “be a better student of history” to know better. He needs to observe human psychology. What he needed to do is work in a car plant and see its organisation and observe its vulnerabilities without knowing anything much about “history”, or much else, for that matter, except perhaps something about the human psychology of real, ordinary people, who are much smarter than they are often credited.

[For years later, I often replied, when asked by colleagues, even interview panels (for which I was told by a senior profesor that I “lived dangerously”), which univeristies I had attended, that I first graduated from the ‘University of Life’, and, then I went on to graduate from three Universities of ‘Academe’.]


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