Mr Ford's Latest

Cooper, Lyle W

MR. FORD'S LATEST By LYLE W. COOPER To a greater extent than is generally realized, Mr. Ford's theory of wages has been accepted as an American employment ideal. The following paper, by a...

...An out-and-out condemnation of holding companies is not intended...
...And here, once more, holding companies come into the picture...
...In the Ford version, a primary way to accomplish this laudable purpose is to create greater demand for commodities...
...A partial explanation is that Ford is Ford, unique in the business community...
...Moreover, failure to follow up the union program, announced at Detroit in 1926, of organizing the workers in the automobile industry, is evidently explained by the absence of the proper organization machinery...
...Or, to the extent that attention is directed to the problem, the remedy consists of opening up new opportunities for labor-that is, cure unemployment with employment...
...that is, during a period of slack business, general wage increases would intensify the problem of unemployment...
...This state of things is different only in degree from that which commonly exists when the corporate form of doing business reaches its logical result: a large mass of undifferentiated stockholders whose primary interest in the business is one which springs from the desire for maximum quarterly dividends or from the even more tenuous tie that obtains where the motive to own stock is to sell "on the rise...
...Such companies, like Henry Ford, are doubtless institutions with purposes to serve...
...The complete explanation would require delving into all of the complexities involved in the inertia underlying traditional methods of determining the market rate of wages on the basis of supply and demand of labor...
...Even the relatively high wages which Ford pays do not provide his workers in Detroit and elsewhere with sufficient income, when production slackens for a period, to obviate the need for huge charitable contributions the major part of which is not supplied by the Ford family...
...And the typical successful manager cannot permit himself the luxury of looking, in a practical way, beyond the immediate present...
...After all, the legal claims to ownership possessed by the stockholder are calculated to secure greater future consideration than any claim the wage-earner can advance- other than that of wages due for past labor...
...Concerning unemployment, evidently Ford is neither worse-nor better-than the general run of business leaders...
...This is not the place to argue the relative merits of government unemployment insurance versus unemployment insurance by industry...
...These measures, Ford maintains, involve greater production-for supply always comes forth to meet demand-and, as a natural corollary, the needed expansion in employment takes place...
...How about General Motors...
...Wage-earners, through being able to save more, would thereby be better protected against the time when jobs become scarce...
...Of course, there have been those to belittle the new Ford policy...
...There is also something to this criticism, but even so, the Ford record shines brightly in contrast to that of many other leading prosperous concerns...
...It may be conceded that higher wages, though stimulating to greater efficiency, would be the economic salvation of some concerns...
...In this connection, however, it may be that Ford approximates the psychology of American individualistic optimism: according to Ford's view, and doubtless in the mind of dominant public opinion, unemployment represents the abnormal and therefore, in conformity with supply-and-demand economics, is to be ignored...
...It may be contended that if these two classes pay below a living wage, they have no right to exist...
...But for many the initial effect of higher wages would be lay-offs...
...for example, steel, automobiles, telephone and telegraph and power companies...
...Intelligent cooperation is the greatest need of industry...
...This last, as may be learned from observation of industrial practice, depends on coordination between producers and organized labor.-The Editors...
...There is a further limitation to the Ford policy...
...We are mainly concerned, however, with wages...
...He can do so because in some respects he is a benevolent despot...
...But while granting the beneficial effect of the Ford wage policy, there are limitations in addition to its shortcomings as a panacea for unemployment...
...Strong unions, while they might not consider expedient a demand for higher wages on a generally failing market for commodities, would maintain a wage level somewhat higher than would otherwise exist...
...But just as holding companies, according to the Interstate Commerce Commission, need to be subjected to government control, so do they-and the Ford Company-need the control in regard to wages, hours and unemployment which organized labor can effectively supply...
...This is admitted, and, as a long-time policy, measures are justified to bring about the demise of those firms which fail to meet the human costs of their existence...
...Holding companies and their super-bank connections play a dominant role in those industries where organized labor finds it most difficult to gain a foothold...
...In fact, when attention is directed to the many firms which are not prosperous, President Hoover's policy of no wage reductions during a period of business recession has greater immediate significance than the Ford procedure...
...No announcement of a wage increase has appeared and it is here predicted that there will be none-at least, not during the period of business recession...
...Other critics wax scornful because they regard the wage increase as a mere bagatelle, insignificant in its relation to the total profits of the Ford enterprises...
...Companies like General Motors, United States Steel, American Telephone and Telegraph, and power companies typified by Electric Bond and Share, are holding companies which are not directly engaged in the business of supplying goods and services to consumers-or of hiring labor...
...Wage theories hinge upon what they can do to offset unemployment...
...Those immediately in charge of wage policy in each subsidiary are not likely to do much in the way of heroic pioneering: for, no matter how liberal their salaries may be, they hold their positions primarily on the basis of ability to deliver the goods in the form of attractive statements of net income...
...Unfortunately, in most of our large manufacturing industries, unionism is virtually non-existent...
...Such considerations are derived, on the one hand, from knowledge that cut-throat competition on the part of small firms frequently makes union standards of hours and wages extremely difficult to maintain, and on the other, from knowledge that the large-scale industry- including the trust-can afford to pay high wages and to grant attractive conditions of employment...
...The following paper, by a prominent student of industrial economics, subjects that theory to an examination...
...This optimistic analysis, so characteristic of our national preference for going ahead, tends to overlook the unpleasant fact that the business cycle is still with us and that, after all, the whole range of industry cannot experience the same rate of growth as the automobile industry...
...and Mr...
...This view is not meant to detract from the dramatic value of Ford's action in calling attention to the importance of increased purchasing power for the masses...
...Hence, the device of the five-day week which results in higher living standards (synonymous in America with enhanced demand for goods and services) and the device of higher wages...
...The most glaring limitation is that a not inconsiderable proportion of business concerns, at any given time, are in no position to carry the heavier operating costs which would be entailed in consequence of paying higher wages...
...The number of such establishments is increased by the "submarginal," comprising those which operate at a loss...
...More justifiable criticism can be leveled against Ford on the score of failure to match his wage policy with one which assumes a degree of systematic responsibility for unemployment...
...Even with proper organization and with leadership of high quality, in all likelihood the task of bringing trustified industries into line will be a Herculean one...
...The point of view which prefers to overlook considerations that do not fit in with its methodology o f insuring progress, naturally assumes that unemployment insurance is unnecessary...
...But while problems of operating efficiency are mainly delegated to subordinate concerns, upon them rests the heavy responsibility of functioning in such manner that the largest possible stream of money flows constantly toward the holding company's treasury...
...In so far as wage-earners are concerned, all of this might be largely immaterial, provided they were fortunate enough to have the protection afforded by strong labor organizations...
...These, in the language of the economist, are the "marginal firms"-those whose selling prices just cover their costs...
...For a while Mr...
...But why the type of individualism implicit should take such an extreme stand as to be indifferent to the desirability of a nation-wide system of employment exchanges, is much more difficult to comprehend...
...In this the unions appear to be correct, and they are to be commended for understanding the implications involved in the rapid passing, in many types of industry, of the small firm as an economically desirable unit of production...
...But the unions have been slow in applying the lesson, which ought to be obvious, to their own situation-namely, the necessity of revamping their organizations along industrial lines...
...Cooper believes that Ford has failed "to match his wage policy with one which assumes a degree of systematic responsibility for unemployment...
...but as long as public opinion regards government unemployment insurance as a "socialistic" importation from Europe, it is clearly in order for the unions to persuade employing interests to bear a major part of the cost of unemployment...
...While not seeking to minimize other influences, a major factor evidently derives from the financial set-up of some of our most dominant business concerns...
...but such companies, for the very reason of their superficially democratic arrangement of widespread stock ownership and their subordinate operating companies-with the resultant greater imper-sonalization-are not accustomed to temper appreciably their despotism with benevolence...
...Additional cases in point might be cited, but it is clear that substantial wage increases and other improvements can best be secured through strong organizations of labor, and that the organizations required can be achieved only when the unions set their own houses in order...
...But perhaps it is not so well understood that the sense of social responsibility manifested by big business toward wage-earners is typically certain to be less than toward the ordinary stockholder...
...But further explanation is needed of why General Motors and other prosperous companies in the billion-dollar class do not see fit to stimulate purchasing power by means of higher wages...
...Ford may continue to startle the country with his seeming unorthodoxies in matters economic...
...Otherwise, he may find that he also has joined the ranks of the unemployed...
...Some sceptics are anxious to have explained how "fictitious" wages can benefit the numerous Ford workers who have been laid off-a pertinent question, but one which does not vitiate the fact that those who still retain their jobs are recipients of more income than otherwise or that their fellows who return will secure the benefit of a higher wage scale...
...IN THE face of business Idepression, Henry Ford's announcement of wage increases for his employees was in keeping with his reputation for the unexpected...
...Unionism, as exemplified by such organizations as the Amalgamated Clothing Workers and the Electrical Workers, would also successfully bring pressure upon owners for the inauguration of unemployment insurance...
...The Federation's attitude in part has been the product of a well-founded fear that anti-trust laws might be used against labor unions, and in part the attitude has been an outgrowth of economic considerations...
...But as an immediate remedy for present or threatened unemployment, higher wages for those at or below the "margin" simply would not work...
...The holding company as a form of business control is our latest version of the "trust," about which Bryan, Roosevelt and Wilson, reflecting the public opinion of their time, evinced so much concern...
...These mundane pursuits are carried on by subsidiary operating companies, thus permitting the holding companies to soar in the more ethereal but more exhilarating-and lucrative-realms of high finance...
...The reference to Ford's position on unemployment is designed to make clear that his wage theory as a cure-all is wofully inadequate...
...However much some of them might be intrigued by the wage theories of a Ford, the successful working out of such theories depends largely upon indirect consequences, farther removed than the immediate present...
...Why the difference in policy between the two giant concerns in the automobile industry...
...Companies which could well afford to emulate it are not rushing to do so...
...In fact, this impersonalization of the modern corporation has its ill results for most stockholders, as Professor W. Z. Rip-ley has amply demonstrated in Main Street and Wall Street...
...Organized labor, as embodied in the American Federation of Labor, has never extended support to movements animated by a desire to "bust the trusts...
...Holding companies, in essence, are no less despotic...
...Their failure in the steel strike of 1919 was in large part directly traceable to the lack of one union in place of the dozens of craft bodies, jealous of their jurisdictions and with their leaders out to sabotage one another's ambitions...
...such difference as exists lies in the circumstance that we have learned to expect more from Ford than from others in the way of an enlightened labor policy...

Vol. 11 • February 1930 • No. 17


 
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