There was, prior to the Covid-19 epidemic in 2020, a controversy over the low wages that still prevailed in many parts of the United States. Covid-19 created an apparent labor shortage that resulted in enormous increases in wages, with entry level jobs starting at $15 or more in even low-cost states like Pennsylvania. These wage increases in the absence of corresponding productivity, however, along with supply chain interruptions have resulted in rampant inflation for everything ranging from basic necessities to new and even used automobiles.
Henry Ford and other industrialists proved long ago, however, that productivity increases as driven by what we now call lean manufacturing can enable higher wages side by side with lower prices, which gives workers genuine increases in their standard of living. The key to understanding of how this occurs is recognition that wages, prices, and profits are not a zero-sum equation in which one stakeholder's gain must come at the expense of the others, but rather a situation in which removal of the waste that affects the entire supply chain delivers more value to all the stakeholders.
Attendees will learn that there is in fact not a trade-off between wages, prices, and profits. While it may seem counterintuitive, Henry Ford proved long ago that high wages are synergistic with low prices and high profits, while low wages are often symptomatic of high prices and low profits. The latter is because low wages give enormous inefficiencies a place to hide, while managers must, in cooperation with labor, remove these inefficiencies to realize high wages, high profits, and low prices simultaneously.
Three additional vital takeaways are:
- The inefficiencies often hide in plain view because they are asymptomatic and do nothing to announce their presence. They are also usually built into the job which means they are present 100 percent of the time.
- Opportunity costs, or the costs of failure to implement better technology and equipment, can be far more costly than inefficient jobs.
- Luddism, the proposition that higher efficiencies destroy jobs, has been proven wrong repeatedly for more than two thousand years. Higher efficiencies have instead made slavery and robot (a feudal tax in the form of labor) largely obsolete and began to make low-wage labor largely obsolete more than 100 years ago.
- Despite a low unemployment rate, wages remain low although this is changing due to a growing labor shortage. The problem with the latter is however that wages rise without corresponding productivity gains, which results in inflation. Productivity gains, however, enable higher wages and lower prices simultaneously.
- The root cause of both problems (low wages, or inflation when wages go up without commensurate productivity improvements) consists of substantial or even enormous inefficiencies in the job designs. These inefficiencies can waste two-thirds of the workers' labor, or even more. These wastes are often asymptomatic because, unlike poor quality, they do nothing to announce their presence, and they are also usually present 100 percent of the time because they are built into the jobs. A key takeaway from this webinar is the need to recognize this waste, which is usually very easy once one knows what to look for.
- Off the shelf solutions were developed more than 100 years ago by Henry Ford, Frederick Winslow Taylor, and Frank Gilbreth. They proved with quantifiable results that it is easily possible to improve job productivity two or three-fold. As but one example, Gilbreth's non-stooping scaffold proved that brick laying, as practiced for thousands of years, wasted 64% of the masons' labor. Removal of this waste enabled higher wages, lower prices per brick laid, and higher profits for building contractors.
- Opportunity costs, or the costs of foregone opportunities to introduce better technology and equipment, can be far more costly than even the inefficiencies that are built into most jobs. Henry Ford (My Life and Work, 1922) wrote of this, "If a device would save in time just 10 per cent. or increase results 10 per cent., then its absence is always a 10 per cent. tax." These "taxes" can be, however, on the order of 100-fold or even more. There are frequent complaints about the low wages paid to many agricultural workers but accompanying pictures show that the workers have to walk and bend over to do their jobs. This waste can be easily eliminated with some very inexpensive equipment, even if farmers cannot afford automated harvesters that cost hundreds of thousands of dollars.
- Luddism, the proposition that higher productivity will make workers unnecessary, has been around for more than two thousand years (starting with Aristotle and the Romans), and the Luddites have been wrong for more than two thousand years. Henry Ford, for example, increased rather than decreased employment because lower prices increased the demand for automobiles.
- The truth is that higher productivity (as predicted by Aristotle) rendered slavery uneconomical long ago and is similarly rendering low-wage labor uneconomical. As an example, slave labor was once used to harvest cotton but now a paid worker with a machine can do the work of a thousand people without one. Unpaid labor in the form of robot (a tax in the form of labor rather than money) was used initially to excavate the Suez Canal but then steam shovels were brought in. This trend will, by extension, render low-wage labor similarly obsolete and deliver high-wage jobs for all.
Who Should Attend
Managers with profit and loss responsibility, policy makers, unions, people with purchasing responsibility, CEOS