Yes, paying workers just enough so they can afford a paperclip is obviously a bad idea.
Yes, paying workers just enough so they can afford a 747 is obviously a bad idea.
Yes, it's still a bad idea when an efficient wage would be just enough for them to afford the same product (here, a Model T) you're producing. Even if that is a good idea here, the standard -- pay workers enough to buy the output -- is a bad one, because the output could be anything from a cheap consumer good to a megaproject.
[1] which, full disclosure, I've made myself: http://blog.tyrannyofthemouse.com/2012/01/mr-ford-meet-boein...
[2] even under general mechanisms by which "price tends to cost" and intelligent uses of the labor theory of value, a worker might be contributing a valuable input (engineering design), or a not-so-valuable input (cleaning services for the offices).
So the good-faith version of the argument would be: people who work at Boeing should be payed enough to afford going on vacation by airplane.
(I’m not saying I agree with that statement, as it’s an odd benchmark for other reasons. But it isn’t ludicrous.)
Even if you could capture 100% of their extra pay (an absurd assumption, realistically 2% is huge) you are better off just keeping that money yourself since you'll have to provide them with whatever product/service you sell, which costs money.
Not even if their marginal propensity to consume is high?
I think Worstall is correct that the story only makes sense if the pay decision can be generalised to other companies, otherwise it won't have enough effect on the market.
But there's no good reason to generalise "Ford workers should be able to afford cars" to "company X workers should be able to afford company X products".
Rather it should turn into something like "Factory workers should be able to afford cars".
>It should be obvious that this story doesn't work: Boeing would most certainly be in trouble if they had to pay their workers sufficient to afford a new jetliner.
You could go the other extreme and ask the same question about paperclips, but paperclips are a poor substitute for automobiles. The equivalent of a jetliner in Ford's day would probably be closer to the Titanic than a Model T.