The cotton-harvesting example shows that the ratio can be 1,000 to one, or even higher. Employers should therefore welcome rather than resist high wages when productivity improvements enable them because, as Ford said, “It ought to be the employer’s ambition, as leader, to pay better wages than any similar line of business, and it ought to be the workman’s ambition to make this possible.”9
Much of the original work on the Suez Canal was performed by unpaid workers under the robot or corvée system (in which taxes are paid in labor rather than money).6
This U.S. Marine Corps recruiting slogan is almost as old as our country. In 1789, Capt. William Jones advertised for “a few good men” to enlist.4
None of this suggests that attempts to mandate high wages for jobs that don’t generate enough value to support them will end well. Suppose, for example, a government mandated a $10 per hour minimum wage to pick cotton by hand. If the farmer had to pay a thousand workers to do the job, this would come to $10,000 an hour plus employment taxes. Cotton would be unaffordable, and everybody involved would soon be unemployed. It’s quite practical, though, to pay one worker $30 or $40 an hour to run a harvesting machine that can do the same work, even when one adds the capital and operating cost of the machine.
The principle that fewer soldiers or sailors might be better, however, dates back to ancient times.
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Similar things might be said about cobalt mining by artisanal miners, who work for paltry wages in the Congo under conditions reminiscent of King Leopold II’s tenure there long ago. Personal protective equipment is almost completely absent, and loss of limbs to accidents (rather than as a punishment for failing to meet Leopold’s rubber quotas) is common. High-wage miners with powered equipment and, of course, safety equipment, could almost certainly mine the cobalt for less money a ton.
Valuable American manufacturing jobs were sent offshore under the dysfunctional belief that low-wage labor would result in lower product costs and higher profits. Although it may seem counterintuitive, manufacturers do better with high-wage workers who will acquire skills, follow work standards, and take initiative to improve business performance.
1. Slaves, people who pay taxes in the form of labor (robot or corvée), and people who know they are being paid as little as possible will do only what they are told, and only when an overseer or supervisor is watching. They will not care about quality, productivity, or service to the customer.
“Forty years ago I watched the workers on the Suez Canal,” wrote Harrington Emerson. “Many of them were girls, digging up the sand with their bare fingers, scooping it into the hollows of their hands, throwing it into the rush basket each had woven for herself, lifting the baskets to their heads, and carrying the load of 20 to 30 pounds a hundred feet up the bank and dumping it. Panama excavation is being done by steam shovels.”
Had the Greeks been able to hold the second path that led behind their lines, Persia would have lost the war at Thermopylae rather than Marathon and Salamis.
“There is nothing sentimental about wages. Hiring men because they are cheap will ruin a business as quickly as buying material because it is cheap.”2
To this Henry Ford added:
The Battle of Thermopylae, in which fewer than 4,000 Greeks faced an army of (purportedly) a million Persians, was a variant of this principle. The Greeks, who were led by the famous 300 Spartans under King Leonidas, occupied a narrow path where the Persians couldn’t bring their superior numbers to bear. The Greeks had to supply food and water for only 3,000 or 4,000 men, while the Persian king, Xerxes, had to supply 200,000 to a million. Xerxes’ position was hopeless until he found a path that would allow him to attack the Greeks from behind. He couldn’t advance because his cheap men couldn’t defeat the high-priced Spartans in the narrow pass. He couldn’t retreat because this would have told his entire army that he was afraid of the Greeks, and it was quite possible that his huge army had already eaten everything in its path and couldn’t live off the land if it fell back. If he stayed where he was, his army would starve.
“We all know that cheap labor is not cheap… In any operation in which the material costs are high as compared with the labor costs, the highest possible pay is the cheapest if it results in savings of material, or in a fine product, or in both. In the grades of production where labor is the big factor, high wages are economical if the wastes of human power can be cut to a minimum.” 1