Long before recent talks about increasing minimum wage, Henry Ford doubled the daily salary of his assembly line workers. This extraordinary move created happy employees, lowered turnover, and saved rehiring and retraining costs. Would we see the same result with a significant increase in the federal minimum wage today? While the debate continues, stay proactive by finding the right balance for your company regarding fair pay and by clearly communicating expectations during the hiring process.
Henry Ford model
In 1914, Henry Ford more than doubled the daily wage to $5 of workers in his Model T factories (he also cut the work day from 9 to 8 hours). He did this to reduce worker turnover (many could not take the monotony of the assembly line).
The increased wages actually saved the company money in rehiring and retraining costs. But many claim that there were two important byproducts of this action:
- It created goodwill (his actions were reported worldwide)—this increased car sales.
- It created consumers (his workers earned enough so they could afford to buy his cars).
One Forbes opinion piece says it’s “ridiculous” to apply the Ford model to the current McDonald’s controversy where workers are advocated for $15 per hour—will it enable workers to buy more burgers?
Keeping pace with inflation
If the minimum wage were adjusted annually for inflation, what would it be today? The federal $7.25 per hour rate took effect on July 24, 2009. Based on the BLS calculator, that rate would be $8.05. Clearly, any federal minimum wage increase should be tied to an inflation adjustment so the conversation on increases won’t have to be repeated every several years.
My opinion
I’m not opposed to the idea of a higher minimum wage. My issues with an increase relate to the overall struggle that small business owners face in rising prices: higher health insurance premiums, higher prices for the goods and services they use, and higher taxes. A discussion of an increase in the minimum wage should not be devoid of consideration about other additional costs faced by small business and how they can be expected to survive. A higher minimum wage only benefits a worker if there’s a job for him or her