New Pope and Smart Executives Lead Social Movement

Pope_Francis_in_March_2013(This article was written by Rick Dacri and published in the York County Coast Star, December 19, 2014)

2014 will be a transformative year where societal changes alter economic policy and business operations. First a bit of history. Exactly 100 years ago, Henry Ford doubled the wages of his workers to $5 per day. Folklore has it that Ford reasoned that by doubling wages, his workers could then afford to purchase an automobile from Ford and, in turn, spur sales. As a result of this shrewd business move, Ford started an industrial revolution that lead to the formation of today’s middle class. Reality is a bit different. While Ford did increase wages, his real motivation was to stem rampant turnover in his company. Assembling cars was hard, tedious work. Workers were quitting at an alarming rate and Ford believed that doubling wages would increase retention, saving huge costs on recruitment and training, while also increasing productivity. He was right. Some thirty years later, during the height of World War II, business executives faced a similar workforce problem: a scarcity of labor. With most men (yes, most of the workforce was male) conscripted to fight the war, recruiting and retaining employees was difficult. Wages could not be increased as the government capped them. Undeterred, smart executives began to offer employee-sponsored health insurance as an incentive to entice workers to work for them. It worked and 70 years later, employees generally get health insurance from their place of work.

Fast forward to today. Low wage workers, many of whom are immigrants, from WalMart, McDonalds, the hospitality industry and others are protesting over pay, lack of affordable health care and working conditions. While generally not gaining wide spread support, their position is slowly gaining some traction as both an economic and social movement and some politicians in Congress and the state legislatures, primarily in blue states, are beginning to tout the need to increase the minimum wage. But with a divided Congress and state legislatures, their potential success seemed limited until Pope Francis came forward with his Apostolic Exhortation and everyone started to listen.

While one can question the Pope’s expertise when it comes to economic policy, it is hard not to pay attention to his pronouncements on social issues, the plight of workers, and the impact economic policy has had on the poor. This new pope’s focus on people has resonated with many: workers, social activists, politicians, and business leaders, whether Catholic or not. And you must remember, 30% of those serving in Congress are Catholic.

Expect to see the minimum wage to increase in 2014. Immigration reform, which failed in 2013, will get new life in 2014. Both are economic issues that will pass because a social movement has found a new, powerful and influential voice.

Yet if we look back, there was no government policy that forced Henry Ford to raise wages or WWII executives to offer their workers health insurance, only individuals who took control and enacted change to help their companies. In turn, their workers benefited, with economic and social policy transformation following. And here is where there are similarities. As the market continues to heat up in 2014, with the Dow climbing close to 17,000 and unemployment diving to 6.5% or lower, smart executives will act to voluntarily raise wages beyond any government mandated minimum wage. Like executives of the past, they know that to recruit and retain scarce labor (we continue to face a shortage of skilled labor), wages must rise, health insurance must be affordable, and training must be provided. In other words, smart executives know to remain competitive and grow their companies, they must take care of their employees. A healthy vibrant workforce benefits companies, workers and society.

The Pope’s call for “dignified work, education and health care are good things any good Christian ought to help others gain access to,” may be an issue of social justice, but it has always been a front burner issue for enlightened executives. While government has a role, waiting for its leadership on these important issues would be a mistake. The Pope has provided a moral compass. Business leaders will show the way. All employees will benefit. 2014 will be a good year.

What do you think will happen in 2014? I’d like to hear from you. Leave your comments below.

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Filed under Economy, Strategy

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