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A lesson from business magnate Henry Ford

ID: INTERACTIVE DIALOGUE

DAVID MULLINGS

Sunday, January 12, 2014    

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WHILE I keep reminding people that Jamaica should not copy everything from America, as we do not want the same level of income inequality and individualistic society, there are specific things we can learn from the USA.

My most recent purchase was a book titled The Greatest Business Decisions of All Time by Verne Harnish. He included a decision I am familiar with because it was taught during my MBA programme -- that of Henry Ford to double the wages of his workers.

The day after I bought the book I received the latest newsletter from the US Department of Labour that included the following under their Did You Know section:

One hundred years ago this week, Henry Ford announced that he would more than double the wages of many of the workers at his Model T assembly plant in Dearborn, Michigan. On January 5, 1914, Ford said he would begin paying them $5 per day. His primary purpose in paying a significant minimum wage was to reduce worker turnover; however, he also reduced the work day from nine to eight hours and was able to run three shifts instead of two, thereby increasing output.

This increased efficiency allowed Ford to produce inexpensive cars in volume, and he found new customers in his employees who could now afford to buy them. Also, people flocked to Michigan from all over the world seeking a chance to work for Ford.

A century ago, Ford intuited what academic research has concluded in more recent years: that minimum wage increases have little to no negative effect on employment, reduce employee turnover, increase productivity and stimulate economic growth as low-wage workers have more money to spend. As Ford said, "Countrywide high wages spell countrywide prosperity".

In business school we called this "enlightened self-interest" because it benefited the society as well as Ford. It was in his interest to pay the workers more.

Tanya Stephens has a song on her album Gangsta Blues that makes the statement even clearer for Jamaicans. Here are excerpts from verses 1 and 2:

Verse 1 excerpt

Providing no jobs and

telling us stop the crime

Is like beating a child

and telling him not to cry

Verse 2 excerpt

Even the richest man haffi go

learn fi tek a stance when

dem realise seh dem no safe

inna dem mansion

is a tough way fi learn seh yuh

no really secure

when the problems of the poor

come kick dung yuh door

Some can choose to ignore the music and language of the streets, but then they miss out on the true mood of an entire segment of Jamaican society. Tanya is right because one can just look at South Africa today. Building higher walls and hiring more security is not the approach Henry Ford would take.

David Mullings is the chairman and CEO of Keystone Augusta, a private investment firm and was the first Future Leaders representative for the USA on the Jamaican Diaspora Advisory Board. He can be found at Facebook.com/davidpmullings and Twitter.com/davidmullings

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