One of America’s enduring myths turns 100 this year. In 1914, Henry Ford doubled the pay of workers in his automotive factories to $5 a day — but not because he wanted them to be able to afford the cars they were building.
The Ford Myth was trotted out last week to explain why Walmart had indicated it might support an increase in the federal minimum wage. Walmart had just reported its fourth quarter profits were down 21 percent. Cold weather across the country had a lot to do with it, but so did the economy.
In a nice bit of irony, Walmart is facing increased competition from dollar stores and off-brand grocers. The low-wage workers who make up a lot of Walmart’s customer base — including its own workers — are finding it harder to afford its prices.
Walmart says its full-time employees earn an average of $12.67 an hour, well beyond President Barack Obama’s proposed $10.10-an-hour minimum wage. Of course not many workers get 40 hours a week, and it takes a while to work up to $12.67. The average sales associate makes $8.81 an hour, still more than the minimum wage in most states.
Walmart could learn from Henry Ford’s real reason for his 1914 action: He was trying to cut down employee turnover. The state of Michigan’s official history for its Ford historic sites notes that in 1913, Ford had to hire 52,000 workers to maintain a workforce of 14,000. His new assembly lines were grueling and dangerous; when a guy walked off, the whole line shut down.
It was to boost production and cut down on turnover that Ford put in his $5-a-day wage; workers also had to put up with company inspectors invading their private lives to make sure they were living “the American way.”
But it worked. Production ramped up, costs went down. By happy coincidence, the price of a Model T dropped to $300, and some of the workers bought them.
Walmart has cut its turnover rate from 70 percent in 1999 to something closer to the industry average of 44 percent. At Costco, a direct competitor of Walmart’s Sam’s Clubs, where wages are higher and benefits are better, it’s only 17 percent.
One reason Walmart was able to cut its turnover rate was the rise in the federal minimum wage in 2006. In 2005, Walmart’s then-CEO Lee Scott endorsed raising the minimum wage, saying “our customers simply don’t have the money to buy basic necessities between paychecks.”
It hasn’t fully committed to supporting another hike, much less $10.10 an hour. But the same arguments apply.
Last week the Congressional Budget Office estimated that a $10.10 minimum wage would cost 500,000 jobs. Other economists say that companies already have cut their workforces as far as they will go. If the minimum wage goes up, they’ll have to raise prices and everyone will adjust.
The 500,000 figure would affect mostly teenage, part-time workers. There would be increased earnings for 16.5 million other low-wage workers, the study found. Some 900,000 workers would be lifted out of official poverty altogether.
Polls have showed support for a higher minimum wage as high as 71 percent, including 52 percent among Republicans. House Speaker John Boehner, R-Ohio, is not one of them, making it unlikely that the measure will get a vote in the House.
This could backfire on Mr. Boehner and the Republicans in November. But low-wage workers would have to show up at the polls for an off-year election. Historically, most of them just prefer to complain. Republicans count on that.
Copyright St. Louis Post-Dispatch. Reprinted with permission.