Indefatigable myth buster Don Boudreaux nails another one in the following letter, namely the myth that something is wrong unless workers are paid enough to “buy back the product” — a silly but superficially appealing notion that unions capitalized on to obtain public support.
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Harold Meyerson asserts that 20th-century America was blessed by an “equilibrium among production, wages and purchasing power – the equilibrium that Henry Ford famously recognized when he upped his workers’ pay to an unheard-of $5 a day in 1913 so they could afford to buy the cars they made (“Corporate America, paving a downward economic slide,” Jan. 5).
This popular account of Ford’s pay raise is a myth. Ford raised wages in order to attract and keep good workers; he was obliged to do so because of competition for labor.
As for the alleged “equilibrium” that Mr. Meyerson mentions, to understand that it is fanciful requires only that one ask the following question: would Boeing remain solvent if it raised its workers’ wages so that they could afford to buy the commercial airliners they make?
Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
