This makes a nice legend, but I don't think even Henry Ford ("History is bunk!") was ignorant enough of economics to say it. He paid above-average wages to hire and keep skilled workers.
It should be obvious that the workers in a factory cannot possibly buy up the entire output of the factory, no matter how much they are paid. Some of the money flowing in the front door from sales has to go out the back door to pay suppliers, pay for utilities, pay interest on debt, and pay taxes, not to mention paying the shareholders if there is anything left for profit. Paying what's needed to attract and hold the skills you need in your work force makes sense. Other than that, you want OTHER employers to pay THEIR workers enough to afford YOUR products, since most of your sales will be to people who are employed by some other company.
Yes. Tired of that silly legend.