07 February 2015

On the Wage Economy: Everything Old Isn't Exactly New Again, but It's a Start

Some people are actually beginning to remember another time when wage-gouging, profit, and the bottom line weren't the handbasket in which we were all riding to Hell. I call the following sensible wage logic "The Great A-Doy, Now." 

From the usually excellent New Yorker Financial Page, this time by James Surowiecki:

"...A substantial body of research suggests that it can make sense to pay above-market wages—economists call them 'efficiency wages.' If you pay people better, they are more likely to stay, which saves money; job turnover was costing Aetna a hundred and twenty million dollars a year. Better-paid employees tend to work harder, too. The most famous example in business history is Henry Ford’s decision, in 1914, to start paying his workers the then handsome sum of five dollars a day. Working on the Model T assembly line was an unpleasant job. Workers had been quitting in huge numbers or simply not showing up for work. Once Ford started paying better, job turnover and absenteeism plummeted, and productivity and profits rose.

"Subsequent research has borne out the wisdom of Ford’s approach. As the authors of a just published study of pay and performance in a hotel chain wrote, 'Increases in wages do, in fact, pay for themselves.' Zeynep Ton, a business-school professor at M.I.T., shows in her recent book, 'The Good Jobs Strategy,' that one of the reasons retailers like Trader Joe’s and Costco have flourished is that, instead of relentlessly cost-cutting, they pay their employees relatively well, invest heavily in training them, and design their operations to encourage employee initiative. Their upfront labor costs may be higher, but, as Ton told me, 'these companies end up with motivated, capable workers, better service, and increased sales.' Bertolini—who, as it happens, once worked on a Ford rear-axle assembly line—makes a similar argument. 'It’s hard for people to be fully engaged with customers when they’re worrying about how to put food on the table,' he told me. 'So I don’t buy the idea that paying people well means sacrificing short-term earnings.'”

Oh! And while we're on the subject, if you happen to run into Trickle-Down Economics (aka "Supply-Side") in your travels, please do it with your car--or please tell it to kindly go fuck itself. It doesn't work; it never worked; it only works for making rich people richer. It doesn't "trickle down" to us peons, rather Trickle-Down Economics (note the disingenuous use of the word "trickle") works like a series of rocket stages, employed to increase individual and corporate wealth only. Moreover, one can't have a supply that works without a viable working-to-middle class to provide the demand, unless you have free-reign--under international trade agreements--to seek low-wage laborers and "off-shore" markets to take the place of a viable American one. But hey, this is about livable wages--what a concept! Jesus is my Economist.

It's a short piece, and you can read the whole thing at NewYorker.com.

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