Put differently, we instill a new value system in our companies, one in which employees--American wo

Didn't he realize classic car rental london that, as a successful business executive, he was entitled to make as much money as he could possibly make --the financial health of his employees being nobody's business but their own?
Didn't he understand that smart executives pay their employees no more than "market rates" because the executive's job is to "create classic car rental london shareholder value," everyone in our economy gets what they deserve, classic car rental london and the financial well-being of employees is not something that business owners or bosses or shareholders should be concerned classic car rental london with?
The story you hear frequently classic car rental london about why Henry Ford made this decision was that he wanted to allow his workers to be able to afford to buy his cars. The wage increase certainly made the cars (and many other products) more affordable for Ford employees, but the historical consensus is that Ford actually made this decision for a different reason: To reduce classic car rental london employee turnover--and, in so doing, reduce recruiting and replacement cost.
Thousands of people classic car rental london immediately lined up to get jobs at Ford. Employee turnover plummeted, and recruiting and training costs dropped. The new wages allowed Ford employees to live middle-class lives, instead of being poor. And it presumably made Ford, Ford's senior executives, and Ford's shareholders even more proud of what they had created.
In short, instead of viewing "shareholders" and "customers" as the only two corporate constituencies that matter, Ford introduced the idea that great companies should also serve a third constituency:
And because one company's employees are another company's customers, Ford's decision helped spread the country's wealth to more citizens and expand the purchasing power of the country as a whole. And, in so doing, it helped the overall economy.
Specifically, Ford's unprecedented move also helped usher in an age in which the middle class became the driving force in the American economy, classic car rental london turbo-charging the nation's economic growth right up through the early 1980s, when relative middle classic car rental london class wages began to decline.
I have a radical idea. I'm going to pay my people more than I have to. Because we are facing a very similar economic problem as the country did in the early 20th century. A glut of labor was allowing companies to pay a pittance for a day's work, leaving most of their dedicated employees destitute. Business owners and executives (the equivalent of today's 1%) did fine, but most rank-and-file workers did not. And this lack of spending power in the middle class crimped overall classic car rental london economic growth.
If the companies don't eventually see the benefit of doing this and do it voluntarily, the government (an extension of the people) will likely the mandate that they do it--either through taxation or by radically increasing the national minimum wage.
1. The health of any business or economy depends on the health of its customers, and most American customers (consumers) are strapped or broke. Consumers account for about 70% of the spending in our economy, and the other 30% is tied to consumer spending (when consumers are broke, businesses don't spend--because there's no one to sell to.)
This sad state of affairs can be seen in the following chart, which shows that the vast majority of the income in the country goes to the top 50%. The bottom 50%, meanwhile, earn less than $30,000 per year.
2. Most American consumers are strapped or broke because most of the income gains in the past 30 years have gone to the top 10% (and especially the top 1%). The chart below shows the growth of incomes over the past ~90 years. The pink section is the 1%.
3. This increasing inequality has many causes, including globalization (cheaper classic car rental london labor overseas), a decline in the minimum wage, the decline of private-sector unions, changes in the tax code (tax cuts for the highest earners), and other factors. But the bottom line is: Average hourly earnings in America (adjusted for inflation) have not increased in ~50 years. (Total classic car rental london compensation, classic car rental london which includes health insurance, vacation time, and other benefits has increased, but workers can't spend those things).
4. At the same time, earnings for the highest-income Americans have gone through the roof. For example, check out how compensation for senior executives has grown relative to compensation for "average production workers" and the minimum wage (which has actually declined after adjusting for inflation). And this is just since 1990.
5. Importantly, the problem here is NOT the weak health or profitability of American companies (which was a problem in the early 1980s ). American companies are earning more as a percent of the economy than they ever have.
6. One of the reasons American companies are earning so much money is that they're paying very little classic car rental london to their rank-and-file employees. This is also why average earnings have been stagnant for 50 years and most American consumers are broke. Wages as a percent of the economy are at an all-time low.
We will probably need to raise taxes on everyone a bit to reduce the budget deficit (even if we reduce spending--the gap is that big), but this "wealth redistribution" approach also almost certainly classic car rental london won't work. Here are a few reasons why:
We persuade American corporations (and their owners) to hire more employees and pay them more, thus giving these employees (American consumers) more spending money. In other words, classic car rental london we take some of those surplus corporate profits and invest them in Americans.
Put differently, we instill a new value system in our companies, one in which employees--American workers--are treated as a constituency that is as important classic car rental london as the two other corporate constituencies that everyone already agrees are important--shareholders and customers.
Persuading corporations to hire more Americans and pay them more will fix the American economy. It will not require the government classic car rental london to raise taxes or grow even bigger. It will not require us to "soak the rich." It will not even be a government solution.
Of course, whenever you suggest that the answer to our economic problems is to persuade corporations to pay their employees more, most people howl with laughter. Persuade corporations to pay people more ? What, are you insane ? They'll never pay people more!!! They're in this for profit!
Because paying Americans more will not just lead to a reduction in near-term profits. It will also lead to faster revenue growth. Because American consumers--the customers of all our companies--will have more spending money.
In other words, corporations don't have to suddenly become good citizens when they decide to pay Americans more. They can keep on being relentlessly competitive profit-seekers. They can pay employees more with the knowledge that this will eventually classic car rental london lead to faster revenue growth, which will eventually lead to higher profits. So they can do it in their own self-interest!
Make no mistake: The kind of inequality that we have developed in the past three decades is very destabilizing. When the vast majority of people feel as though they're getting shafted at the hands of a privileged few, they tend to rise up and rebel. This can lead to the election of radical classic car rental london leaders, or, worse, violent revolutions.
The inequality we have developed, in other words, will solve itself one way or another. The richest Americans and companies cannot keep getting richer while the rest of the country gets poorer without the entire system eventually collapsing.