Give Them a Raise.(labor policy on setting a minimum wage to battle recession)

Byline: George Wehrfritz

Setting a minimum wage for Asia's poorest workers could help speed the world out of recession.

Henry Ford, that lion of industrial innovation, was also a champion of the men in his employ. In 1914, to the chagrin of many within America's moneyed elite, he more than doubled the hourly compensation paid to the workers then bolting together Model T's on his assembly lines in Michigan to $5 per day, enacting what he called "the most advanced labor policy in the world." Ford's reasoning: "We believe in making 20,000 men prosperous and contented rather than follow the plan of making a few slave drivers," he said. Over the subsequent decades, thousands bore testament to that logic as they purchased homes, raised families, sent kids to college and even dashed about town in shiny new Fords.

Ford's "welfare capitalism" presaged the rise of a blue-collar middle in America's economy that, from the end of World War II until the early 1970s, delivered stable growth. It has since broken down, of course, and the crisis America's Big Three automakers now find themselves in owes much to the exorbitant cost of unionized labor. Yet in today's global economy, one plagued by overcapacity and a shortfall in demand, Asia's ultralow factory wages are a big part of the problem--laborers there simply can't afford to buy much. Which is why it makes sense to pay the legions of factory workers more than the $120 per month they now fetch if only to address the imbalance between China's trade surplus and America's indebtedness.

Back in 2003, financial analyst Richard Duncan made that case in his prescient book, "The Dollar Crisis." It forecast America's subprime-led financial bust and argued that the global economy's well- being rests heavily upon Asia's ability to consume more of what it manufactures. To halt the "race to the bottom" typical among manufacturers seeking ever-cheaper production bases in emerging Asia, Duncan proposed establishment of a $5 per day minimum wage for the region, which is marginally higher than starting pay in Southern China and more than double the day rate in the textile mills of Bangladesh. Further, he suggested that the minimum be raised by $1 per day every year--thereby tripling the consumption of Asia's vast working class in a decade.

Duncan, now a partner at Blackhorse Asset Management in Singapore, believes that kind of ...