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The paying and the receiving of wages involve a great deal more than the mere transferring of a sum of money. The whole paying of wages as well as the hiring out for a wage has been clouded by tradition. There is, on the one hand, the master-and-servant tradition in which the master is supposed to be kind and appreciative and the servant to be dependent and grateful. On the other hand is the big-family conception in which equality, harmony, and democracy of management figure.

In my view of wages and the relation of the employer and the employee, they are not a small universe hi themselves; both are part of and dependent on the larger social world. The amount of work done for society and the amount of money society may profitably pay for that work determine the industrial relation, although that in turn is determined by the quality and extent of the service which industry may render. Improvement in these relations is always possible where the will to improvement exists.

But it is necessary to get away entirely from the thought that the relation between employers and employees has in it anything of meniality. Employers and employees are to be judged by the same standard—are they efficient or are they inefficient? An employer who is not fit for his job comes under the same law as any other inefficient worker. There is nothing in his status as employer that will save him. He has responsibilities but no divine right. If he is a good man in his job he will pay good wages, just as he will make a good product. And his workmen, directed by him, will be enabled to earn good wages. It is a matter of efficiency, not philanthropy. The only pride or satisfaction either may have in it, or even gratitude, is the feeling that this is a world that yields right results to right efforts.

But the relation between employer and employee is not in the least a sentimental one, and the artificial cultivation of good feeling only tends to obscure the real objectives. An artfully arranged attempt to stimulate good feeling usually has for its purpose the concealment of some deep source of bad feeling. Good feeling arises from the situation, or not at all. The paying and receiving of money is the paying and receiving of money. If it be not earned, it cannot be paid, and it should not be paid if it could be. If it be earned, then there is no reason for the employee being grateful for being paid what is justly due, nor for the employer being self-righteously proud for paying it. This view of the relation between the employer and the employee has many consequences which flow counter to the accepted tradition.

Yet you will hear the duties of employers and the rights of employees discussed as if their relation were the only one in the world that mattered—as if these two comprehended all society instead of being only a part of it. It is a curious fact that those who most denounce the industrial order are also those who most insistently try to root it into the very heart of society by making the relation between employer and employee the deepest and most embracing relation between men. It cannot be done. We are all part of a larger order.

Look at this in the light of a concrete instance. It is our belief that the shop is not a permanent thing and that it can exist only so long as it serves. The moment that it has ceased serving, good management will scrap it, or else inexorable social disapproval will. If the obstacle to service is not fundamental, then it may not be necessary to scrap the whole shop but merely to reconstruct it. We ourselves, although we regard nothing in our shops or the shops themselves as permanent and everything as continuously changing, reached a point where it was necessary fundamentally to change our product and its method of making. So we scrapped what was then held to be the largest automobile plant in the world, saved and removed what machinery could be used or adapted for use, placed some of it in another plant which at the same time we reconstructed and then distributed the rest of the machinery among plants in this country and throughout the world. The whole tractor plant was sent to Ireland.

This may seem to have nothing to do with wages. It has everything to do with wages, for these changes enabled us better to serve the public and therefore to pay higher wages. While these changes were going on, some of the men who had worked in the departments that were being dismantled were temporarily without jobs, others had to go into jobs very different from what they had been accustomed to, while others could not fit themselves into the new series of jobs that the new set-up brought about. If we had acted under the theorist's conception that the employer's primary duty is to the man employed instead of to the public, we should not have made the changes, with the net result that to-day, instead of having more jobs than ever before and higher wages than ever before, we should have fewer jobs because we should have less business. And we should have a lowering scale of wages instead of a rising, and everyone would be worse off and no one would be better off.

If a company operates on the theory that it owes a living to those who work for it, then in the course of time it will pass out—and be unable to pay the debt it thinks it owes. Exactly the same condition will be brought about by acting on the theory that the stockholders must always have dividends. Unless the primary service be to the public, no one will be served.

This principle does not seem thoroughly to be understood and it is often difficult to apply, for sometimes its application seems harsh. It seems to imply an indifference to human beings. But, in truth, it has human welfare as its motive. The plight of the men who become temporarily unemployed in the process seems much more important to the unthinking observer than the eventually increased service to all. It is difficult to see the whole picture and to realize that the fortunes of any individual or of any group are always best served when they are made part of a larger service. The individual or the group through a short-sighted view of their interests may be wholly blameless of intentionally retarding progress, yet that is the result of any preference of private before public good.

The right of a man to work is a sacred right, but to preserve a job just because it is a job may seem to be kindness to an individual, but it will be at the expense of a great many others who do not appear in the picture but who are just as worthy and conscientious as he is. Such reasoning, however, seems hard, not because there is any harshness in progress itself, but only because we view progress against a background of so many fallacies. When applied to wage earners it seems hard only because of our traditional conception of master and servant and that somehow the workman is a menial dependent on his employer. Indeed many worthy people cannot comprehend any other relation and, during those periods when the men who should be leading business fail to lead and consequently work is slack, the cry "Give men jobs" arises. Everyone would recognize the absurdity of employers parading bearing signs "Give us orders." There is essentially no difference between the actual position of the employer and the employee. That is the point. If an employer gets his orders through favours and believes that because he has served certain customers for a long time this is in itself a reason for having their orders continue, he is acting on the same false principle as the employee who thinks that his having held a job establishes upon his employer the duty of always providing him with a job. It is a poor rule that will not work for both alike. Long service by either employer or employee should be a reason for continued service—for the experience gained should render their service better than that which anyone else can give. A worker should have so profited by length of service as to make himself more valuable than any man without his experience. The same applies to an employer. But the test of a company, of a workman—or anybody or anything—is solely to be found in the service rendered. And in the end I think that it will be discovered that if all of us—no matter what may at the moment be our respective situations—rid ourselves of the notion that the world or anyone else owes us a living, we shall be the better for it. The approach of dependency, whether in a man or in a corporation, is the approach of helplessness and leads to the asking of a living by favour instead of a living by merit. The corporation which goes out seeking only profits does not get far and neither does the man who goes out seeking only wages—instead of work.

There is no natural level of wages, just as there is no natural level of profits. The conception of a natural level of wages arises out of a state of society in which everything even to the smallest detail is hallowed by tradition. If the inventiveness of an industry comes to a standstill—and this happens whenever an industry gets solely in the control of the financial point of view—then there will be a level of wages and for a time there will be a level of profits. But this level will be only temporary and will steadily be lowered. Industry that has found its level will soon be out of tune with the public—which never finds a level—and will cease to render a service, and then both profits and wages will begin to diminish and finally will reach the vanishing point.

It cannot be too often emphasized that just as there are no essential businesses, also there are no essential industries. If an industry does not serve us we find ourselves involuntarily turning to something else and what is at first taken as a substitute for the essential turns out to be better than the essential. Gasoline and rubber are at present essentials to the automobile industry but, if either should become very poor in quality or very high in price over any considerable period, the automobile industry would find substitutes which would quickly be developed to a point that would forever bar gasoline and rubber—no matter how high the quality or how fair the price. I do not know what those substitutes would be and probably we shall never have to discover them. I only know that if we must have them we shall have them.

The talking about a natural and stable level of wages and profits is a sign of sick business. It is equally a sign of sick business to talk about arbitrarily raising wages. That is not different from arbitrarily raising prices. A high wage is as destructive as a high price. What is felt to be high is out of relation. Right wages are never felt to be high any more than right prices are felt to be high. Right wages and right prices leave everyone with a sense of satisfaction. The best wages are not high so far as manufacturing costs are concerned. The wages which bring prosperity are those which develop out of the inventiveness and engineering skill of the management—combined with the adaptability and cooperation of the men. If the wage comprehension of the management does not extend beyond having the men take a low wage and the wage comprehension of the men does not extend beyond the management paying a high wage, it will be a case of stalemate and it really does not make much difference what wages are paid, for the industry and all the jobs in it will soon be at an end.

In all this, our country as a whole is making a great deal of progress toward a better comprehension of the situation. No one can say that the industry of to-day is not producing more comfort and leisure for the world than that of yesterday. Anyone who prefers to break the ice in his water pitcher in the morning rather than take hot water from a tap can do so without being punished by the industrial system. It is a very free system.

The general condition of prosperity is always a subject of disagreement. There are always those who say that it will not last. The prosperity of the country has always gone forward—even while it was very generally being decided that it was going back. Prosperity is not an accident but something to be cultivated. But it would be very unfortunate to have everyone satisfied with his state of being, for then we should be in great danger.

Yet surely we have moved forward. This is proved by the very nature of the current criticism. Once upon a time people asked only for food; now the critics say that our prosperity is harmful because the people's minds are not developing. Never before has the country been well enough fed to inquire into the state of its mind. And also it is encouraging to note that poverty here and there is brought forward as an exhibit of the weakness of our system. Formerly the poor were taken for granted, and there were far too many of them to be used as exhibits. Poverty was then held as a natural state. Now it is thought to be unnatural. And soon we shall treat poverty as a disease. We shall create a social immunity from it. That is progress.

It will not accomplish this desirable end to pay low wages as a matter of national policy and then to provide against poverty by public services financed out of taxes. Such a programme really never reduces poverty. It accepts poverty as a natural condition and then provides against destitution. But in the long run this plan will not even provide against destitution in an industrial state. The low wages will prevent any expansion of the home market, for the standard of living will be at the subsistence point. The low wages will do more harm than that—for they will make the goods expensive. If an employer can have as many men as he likes at low wages he will be inclined to limit his expenditures for machinery and new designs, for on the low-wage scale they apparently will not pay. And so he will produce out-of-date goods at high prices. The home market for these will be limited. He may gain a foreign market, but this, too, will be limited by price and so in the end the sources of wages and of taxation will dry up.

The only effective wage policy is one that presses forward toward higher wages, lower costs, and lower prices, and in all this we have a long distance still to go, for everything in this country is much too high—except wages. They are too low. In the old business system everything but profits was considered in the light of a necessary evil. A sales price was nearly always fixed in the hope of selling somebody something for more than it was worth. The older business man aimed to sell to a rather narrow circle which he called his trade, and it never occurred to him that he could sell to a whole nation. Therefore he very naturally saw his product in the terms of a very few people and could bargain with those people. Those who sold him his materials had exactly the same outlook and bargained with him on prices. And when it came to employing assistants and workmen he followed the same procedure. If a customer needed his goods, that customer was jacked up to pay a high price, but if, on the contrary, the manufacturer needed the money, the customer had the whip hand. If there were more workmen around than jobs, wages were low, while, if there were more jobs than workmen, wages were high. It never occurred to the older employers—and this is the condition in Europe to-day—that high wages were anything more than an additional cost of production.

Wages are a cost of production, but it does not follow that merely by paying low wages one will achieve low costs of production. The way to low costs is through the intelligent provision of power and machinery and the keeping of the various factors of business in balance. No employer has the right to ask a man to work with intelligence unless he pays him for that intelligence. Good workmanship has to be paid for, and good workmanship is cheap at almost any price. It is simply a waste of time and money to erect an elaborate manufacturing equipment and then expect that it can be run by low-paid men.

There is nothing sentimental about wages. Hiring men because they are cheap will ruin a business as quickly as buying material just because it is cheap. There is something like a natural law which makes sharing not only instinctive but also compulsory. It would not be possible, for instance, to run our business or any other modern business with slaves—no matter how skilled and intelligent the slaves were. And this is regardless of the effect that wage payments have on consumption, for unless the interest—that is to say, the mind—of a man be employed, there is no use employing just his hands. His wage must represent something in the nature of a sharing.

There is nothing that any man can do, the benefits of which he can restrict to himself alone. Society is so constructed that any good produced overflows its original limits and benefits the adjacent people. The supreme folly of selfish intention is that it cannot be carried out. The intention may be present and the selfishness may be unlimited, but natural law frustrates the intended consequences. The surgeon may practise for fame and wealth alone, but his very fame and wealth depend upon his giving benefit. The baker may bake in the utmost selfishness, caring only for the money his craft will bring him, but nevertheless his bread feeds others. Whether we like it or not, one never produces a benefit for one's self alone. No fortune was ever accumulated without increasing the means of wealth to a multitude. Indeed, vast possessions have always supported more people than if the ownership were divided, for there is a magic in consolidated management.

Private ownership, considered in the absolute, extends only a little way. About the only thing a man can own absolutely privately is his experience. Our theory of the private ownership of property—that is, the right of every man to full security in what he has earned—is based on this privacy of experience. What belongs to a man should be his own.

The fact is, we live in a world where nothing has value until it is shared. The value rises in proportion to the number of people who possess it. Creative power does not exist except in company with the desire to share. The very attempt to hide away a value casts doubt on its being a value. Prosperity means to us that the families in the next street, those at the other end of the country, those at the other end of the world, are happy and supplied. We never feel prosperity complete with ourselves alone. Not until the last family has it shall we feel that it has fully come. It is the human instinct for sharing.

We believe that regulating wages on the cost of living is only a way of putting into effect a kind of slavery. It is an utterly illogical method, for the standard by which you measure is thereby made to depend on the thing measured: that is, your standard of living is determined by wages in the first place; to make it in turn the measure of the wage you will pay, is simply to invent another most vicious circle. In determining our wage rates we do not concern ourselves in the least with the cost of living. We have no data on the cost of living among our employees and we do not want any. We only hope that the standards are high and growing higher. The wages we pay are based not on the cost of living but on the value of production. There is no other basis for wages. "Cost of living" is a phrase which means nothing unless it is understood in relation to the standard of living. If the standard is high, the cost is high. But before either standard or cost can go up, wages must go up. The standard of living is fixed by the wages.

The whole question of wages will in the end be worked out by the amount of skill that is required from the workers. This will be the measure of their productivity through machines. The requirement for skill is constantly increasing in the shops so that to-day a man in a shop is usually better off than a man in an office. Workers at machines need a higher grade of skill than the routine men in an office, while tool makers must have a very high grade of skill indeed. This is gradually but surely destroying the advantage of the white collar, and soon we shall have our brightest young men seeking the shops rather than the offices. Brains are becoming so necessary in shops that it is considered good business to pay very highly for them, and there will no longer be the artificial social distinctions between the man who works at a desk and the man who works at a machine.

We are not beyond the creeping stage in business. When business learns to walk then we shall begin to learn something more about wages and probably destroy the lines that to-day separate wages and salaries. Every large business to-day pays salaries which fifty years ago would have been thought impossible—the owners then regarded all their employees simply as so many hired men who ought to be glad that they had jobs at all. There is every reason to believe that with better organization wages will travel in the same direction—provided always that we never have the foreign idea planted among us to the effect that a wage earner should think of himself as a wage earner and utterly dependent upon the will of someone for a job.

Everything that has been said here is taken from our own experience with wages. During 1910 we paid an average hourly rate of 25 cents. This dropped 2 cents in 1911 but in 1913 stood at 26½ cents. On January 12, 1914, we made effective the $5.00 per day minimum rate. This raised the average hourly rate for the year to slightly under 60 cents. In 1915 and 1916 the average rate dropped several cents but by 1918 it had risen to 67 cents. On January 1, 1919, we raised the minimum daily rate to $6.00. This made the hourly rate for that year 77 cents. It reached nearly 86 cents during the inflation of 1920 and in 1921, adding in the bonus then paid, reached 87½ cents. During 1922 the rate was slightly under 80 cents but this was actually a much larger wage than in the two previous years because its purchasing power was greater. During 1923 the average was above 82½ cents per hour and in the following year this increased by a cent and in 1925 decreased a cent. In 1926 the average was over 85½ cents, equalling within a fraction of a cent the wages paid in the inflated currency of 1920. This increased by 10 cents to 95 cents in 1927 and decreased 5 cents during 1928. For 1929 the average was a little less than 92½ cents and then on December 1, 1929, we increased the minimum to $7.00 a day. This brought the average hourly rate for January and February, 1930, to a fraction over $1.00.

That is, during twenty years our average hourly rates have quadrupled. Our present average hourly rate about equals the daily rate for unskilled labour in 1910—for at that time a dollar for a ten-hour day was considered a fair wage. During this period our costs of manufacturing have steadily decreased so that to-day it costs us less than half as much to make a finely and accurately machined piece of highly specialized material than it did in 1910 to make a comparatively crude piece out of comparatively crude material. These are facts and therefore it is not necessary to speculate on whether or not high wages can be paid.

If wages have been multiplied by four in twenty years then they can be multiplied by more than that during the next twenty years. It was generally accepted in 1910 that industry had reached a high state of perfection and there were those who were inclined to sit back and view it with extreme satisfaction. There are those who think that the industry of 1930 has reached a high state of perfection and who also are inclined to view it with satisfaction. These wages have been made possible not by forcing the worker—for he does less hard work to-day than he did twenty years ago—but by new processes, machines, and materials. With this twenty-year accumulation of knowledge, American industry should be able to progress much faster in the next twenty years. Therefore wages can be expected to increase in the future at an even more rapid rate—provided the leaders of industry actually lead. If wages do not continue to increase, the fault will be a human one—it will be due to lack of intelligence.

It is never an easy matter to make a considerable increase in wages and at the same time lower prices. The reasons against such a step are always more numerous than the reasons for it. All our wage increases have been voluntary—that is, our men have never asked for a general raise. When we put in the minimum of seven dollars a day it loaded us with an additional wage payment of about twenty million dollars a year, for a raise was given to every one of our workmen regardless of whether he was receiving above or below the new minimum. But within three months the increased interest of the workers, improved machinery and methods, and an increased volume of sales due to the low prices brought our costs to below what they were before the wage increase went into effect.

If one waits to raise wages until a time when the costs become so low that there is a wide margin of profit on the sales prices—then one will wait forever. We have never yet raised wages at a time when the saving of the extra payments was an open-and-shut matter. In our policy no man is ever raised because he asks for more money. We put in automatic raises in pay for each man every six months. By no means all the men improve enough to be worth their higher wages; if a man reaches a point where he is not earning his money, he may be discharged and rehired at a lower rate. Then his pay raises start up again and it is seldom necessary to discharge him a second time, for he learns his lesson and gives value for his pay. Other men are worth the increases they get and keep on steadily advancing. We have a minimum below which no wage can fall. But we have no maximum rate and we do not reduce wages. We are always better off when the men can earn the highest rate we can pay. It is unfortunate that all men will not or cannot do that.

It will be objected that not all services lend themselves to high wages. That is an old story. In manufacturing the first machinery was designed to do the work in almost the same way as it had been done by hand. When we built our first automobiles we thought of them as horseless carriages and we used bodies much like those was receiving above or below the new minimum. But within three months the increased interest of the workers, improved machinery and methods, and an increased volume of sales due to the low prices brought our costs to below what they were before the wage increase went into effect.

If one waits to raise wages until a time when the costs become so low that there is a wide margin of profit on the sales prices—then one will wait forever. We have never yet raised wages at a time when the saving of the extra payments was an open-and-shut matter. In our policy no man is ever raised because he asks for more money. We put in automatic raises in pay for each man every six months. By no means all the men improve enough to be worth their higher wages; if a man reaches a point where he is not earning his money, he may be discharged and rehired at a lower rate. Then his pay raises start up again and it is seldom necessary to discharge him a second time, for he learns his lesson and gives value for his pay. Other men are worth the increases they get and keep on steadily advancing. We have a minimum below which no wage can fall. But we have no maximum rate and we do not reduce wages. We are always better off when the men can earn the highest rate we can pay. It is unfortunate that all men will not or cannot do that.

It will be objected that not all services lend themselves to high wages. That is an old story. In manufacturing the first machinery was designed to do the work in almost the same way as it had been done by hand. When we built our first automobiles we thought of them as horseless carriages and we used bodies much like those of carriages. It took a long while to learn that the automobile is not a horseless carriage. It took a long while to learn that a paint brush is not necessary in putting on paint—that the paint may much better be sprayed on. It took still longer to learn that a machine with interchangeable parts does not have to be made all in one factory and may be assembled at the point of use. It can be taken as axiomatic that any job which cannot pay high wages and discover them to be cheap wages in point of cost of production is wrong—that the work can be done in some other and cheaper way.

Gradually and without knowing it we are revising all our opinions on this subject. There is no reason, for instance, why a garbage collector should not be a first-class employee. But this end cannot be obtained by simply paying wages. It can be done only by taking garbage as a valuable product. We are now doing this at our British plant—which derives part of its power from burning the garbage of London.

We are increasing in understanding. Nothing, of course, is so nearly right as it should be. It is foolish to praise any present achievements as if we had climbed a pinnacle of progress. But the remedies for what is wrong are not in the hands of those who most loudly proclaim themselves our social and economic doctors. Politicians and theorists and sentimental reformers cannot help us. Shackling business with laws will not give us the liberation into economic freedom which we all desire. Most laws touching economic affairs are harmful because they try to preserve things as they are or as they were. The law deals with a condition which yesterday became intolerable and which to-day is on its way into oblivion; the law thus made for the correction of yesterday's error is a hindrance to to-morrow's progress. Business changes and becomes better in its method, more social in its outlook, but the old law remains. Legislation has never created economic progress.

NOTE FORD AVERAGE HOUR RATES. MARCH 20, 1930 Month of July 1910--Highland Park & Piquette $ .2542 1911--Highland Park only .2316 1912-- " " .2508 1913-- " " .2660 1914-- " " .5988 * 1915-- " " .5224 1916-- " " .5364 1917-- " " .6271 1918-- " " .6703 1919-- " " .7742 ** 1920-- " " .8598 1921-- " " .8764 *** 1922--Rouge & Highland Park .7970 1923-- " " .8266 1924-- " " .8378 Avg. for year 1925--Rouge & Highland Park .8285 1926-- " " .8579 1927-- " " .9524 1928-- " " .9011 1929-- " " .9242 **** Jan and Feb 1930--Rouge & Highland Park 1.0017 --- * $5.00 per day minimum--effective January 12, 1914. ** $6.00 per day minimum--effective January 1, 1919. *** Bonus included in hour rates January 1, 1921. **** $7.00 per day minimum--effective December 1, 1929. ---