DNC Chariman Wacky Tom Perez doesn't understand basic economics

[basquebromance]

DNC Chariman Tom Perez: "Higher wages means higher loyalty and morale, which means higher productivity, which means a more profitable business." In short, the greater a company's expenses, the more profitable it will be. Perez is not exactly a business guy.

 

[pinqy]

DNC Chariman Tom Perez: "Higher wages means higher loyalty and morale, which means higher productivity, which means a more profitable business." In short, the greater a company's expenses, the more profitable it will be. Perez is not exactly a business guy.

When Ford raised wages to $5/day, far more than the average wage, he saw a drop in absenteeism, and greater productivity. These offset the increased costs.

By offering a higher salary than competitors, the supply of labor is increased and the employer can be more selective about hiring, gaining superior workers. Higher loyalty comes because the employee cannot afford to quit or be fired, as there are no other jobs that would pay the same. These result in higher productivity.

IF, and ONLY IF, this increased productivity results in enough higher revenue to offset the additional cost, then a business can be better off by offering higher wages.

HOWEVER: Note that this only applies if competitors wages remain lower. A general increase in wages for all businesses in the field will not have this increase in productivity.

So Mr. Perez is correct, under some conditions.