Schreiber letter to the NYT

[David Farber <farber () central cis upenn edu>]

New York Times Sunday July 2, 1995


What Ford Discovered When He Paid His Workers $5 a Day
To the Editor:
"Bad News for Workers" (editorial, June 24) will also prove to be bad news
for capital owners.


        In today's pressure for higher productivity and improved
international competitiveness, reducing the number of employees and their
wages has become a widespread and socially acceptable practice. As a
result, demand drops, inventories build up, cutbacks increase, and we head
into the classic spiral toward depression.


        While the effects can be staved off temporarily by emphasizing
overseas developing markets, domestic personal spending still accounts for
two-thirds of our economy. It is not possible to take money out of the
pockets of consumers without noticing the effect at the cash register.


        Today's managers have apparently forgotten the lesson taught by
Henry Ford, dean of American capitalism. He discovered that by paying his
auto workers the princely sum of $5 a day (to the dismay of the rest of the
industry), it became possible for them to buy Ford cars. High wages, in the
end, produce high profits.


        It should be kept in mind that the recession that cost George Bush
his office was due to falling demand.  This resulted from the fact that
wages of American workers had been falling during most of the Reagan-Bush
years.


        Jobs today are harder to get, easier to lose, have lower security
and pay less than they did 20 years ago. None of the dramatic productivity
gains of this period have gone to workers.


        Aside from the purely economic consequences, this represents a
repudiation of the American social contract. This unwritten contract has
generally resulted in a steadily increasing standard of living and an aura
of optimism that has gone far to promote domestic tranquillity.


        As money tightens at every level of government and at many non
government organizations such as schools, hospitals and social-service
agencies, we are seeing that tranquillity, much valued by our Founding
Fathers, disappear as we fight over the remaining funds.


        This problem cannot and will not be solved by the free market. On
the contrary, it has been produced by a form of free market in which each
enterprise takes actions that produce the highest profits in the short
term. Since that is what managers are now paid to do, we ought not to be
surprised at the results. If we want some other result, we shall have to
open our eyes to other possibilities.


WILLIAM F. SCHREIBER
Cambridge, Mass., June 24,1995
The writer is a former professor of electrical
engineering at the Massachusetts Institute of Technology