Chris Snowdon tells us all in The Times of how Henry Ford really didn’t raise wages so that the workers could afford the cars they made:

The left-wing equivalent of the self-financing tax cut is the self-financing spending splurge. The idea is that if you pay teachers more, they will spend more and pay more tax. As proof of concept, it is sometimes claimed that Henry Ford gave his workers a pay rise in 1914 so they could afford to buy his cars.

Ford actually gave them a pay rise to deter them from leaving the company. Even if all his workers bought a Model-T, the cost of the higher wages would have exceeded the extra revenue, and most of them would have struggled to afford one anyway.

This is indeed true, as one of us pointed out in detail for those who would like to check the numbers:

We can go further too. As we've seen the rise in the daily wage was from $2.25 to $5 (including the bonuses etc). Say 240 working days in the year and 14,000 workers and we get a rise in the pay bill of $9 1/4 million over the year. A Model T cost between $550 and $450 (depends on which year we're talking about). 14,000 cars sold at that price gives us $7 3/4 million to $6 1/4 million in income to the company.

It should be obvious that paying the workforce an extra $9 million so that they can then buy $7 million's worth of company production just isn't a way to increase your profits. It's a great way to increase your losses though.

The reason for the pay rise was not as some of our contemporaries seem to think it was. It was nothing at all to do with creating a workforce that could afford to buy the products. It was to cut the turnover and training time of the labour force: for, yes, in certain circumstances, raising wages can reduce total labour costs.

The story that Henry Ford raised wages to sell cars to his own workforce not only isn’t true it’s innumerate. So perhaps folk would like to stop parading their ignorance by repeating it?