$5 a Day

Interesting blog post over at Harvard Business Review: “Time for a New Five-Dollar Day.”

The basic gist is we need a leader like Henry Ford who had the foresight to give his workers $5 a day so they could afford a Model T.

Key quote:

This is relevant now because we’re dealing with a new crisis in consumer demand. As many have pointed out, average pay in the United States has been stagnant or declining for decades. Consumers could keep buying because of cheap credit, mostly from rising housing prices, but now Americans have no more sources of easy money. From households to governments, everyone has big debts to pay off, so it’s going to be hard to emerge from the recession.

Everyone, that is, except companies. The flip side of stagnant worker pay has been above-average corporate profits. All the talk about highly competitive markets has hidden the fact that most companies have done quite well in the past two decades. Globalization may have heightened pressures in some industries, but it’s been far tougher on capital and especially labor. Companies that performed reasonably well — even if they didn’t move as fast as others in their industries — still thrived because financing and labor was cheap. Management was the relatively scarce resource, and executive pay has jumped accordingly.

Nice idea, but I think it’d be tough to convince companies to give up all of that profit.

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