On Wednesday, we simulated a car assembly line in our eighth grade classes, with varying degrees of success. Then we learned how Henry Ford used the assembly line to produce cars cheaply and efficiently, making them affordable to most Americans. The car changed American lifestyles in many ways. But Ford also made a crucial decision for his workers: he'd pay them good wages. Remember what we read in Joy Hakim's The Age of Extremes:
Henry Ford understood that if ordinary people were going to buy new products, they needed to earn reasonable wages. So, in 1914, when the average American worker earned $2.40 a day for a nine-hour day, Henry Ford announced that he would pay his workers $5 a day for an eight-hour day. That was an astonishing decision. It was also smart. That $5 a day meant that workers at the Ford Motor Company could afford to buy Ford cars. Henry Ford was creating his own customers.If you've been paying attention to the news, you know that many people are complaining about income inequality in America: the rich keep getting richer, while everyone else just stays the same or gets poorer. This is the big message of the Occupy Wall Street movement.
And now, President Obama is getting in the act. On Tuesday, he gave a major speech in Kansas, criticizing corporations for paying their workers too little and generally lamenting income inequality in America. But there's more: he used Henry Ford to strengthen his argument!
The typical CEO who used to earn about 30 times more than his or her workers now earns 110 times more. And yet, over the last decade, the incomes of most Americans have actually fallen by about six percent. This kind of inequality–a level we haven’t seen since the Great Depression–hurts us all. When middle-class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy, from top to bottom. America was built on the idea of broad-based prosperity–that’s why a CEO like Henry Ford made it his mission to pay his workers enough so that they could buy the cars they made.There, he called for the rich to pay higher taxes, claiming that this would help poor and middle-class people to get better wages.
[W]hen President Clinton first proposed these tax increases, folks in Congress predicted they would kill jobs and lead to another recession. Instead, our economy created nearly 23 million jobs and we eliminated the deficit. Today, the wealthiest Americans are paying the lowest taxes in over half a century...Under President Clinton, the top rate was only about 39%. Today, thanks to loopholes and shelters, a quarter of all millionaires now pay lower tax rates than millions of middle-class households. Some billionaires have a tax rate as low as 1%. One percent. This is the height of unfairness. It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay a higher tax rate than somebody pulling in $50 million...And I know that many of our wealthiest citizens would agree to contribute a little more if it meant reducing the deficit and strengthening the economy that made their success possible.Well, what do you think? Are you surprised by President Obama's arguments? Are you surprised by the income inequality that he describes? Why do you think he referred to Henry Ford? Would you support higher taxes on the rich? Do you think that would really make our economy better?