Ford Motor Company is responsible for many paradigm-altering products and policies, but one of its earliest and most impactful decisions took place on January 5th, 1914. That was the day Henry Ford, along with his vice president James Couzens, announced that the company would henceforth pay newly hired employees at the Ford Model T assembly plant five dollars per day for eight hours of work.
The move was undoubtedly a history-making event as well as a boon for the Ford factory workers who would receive it. But, as is likely the case with any for-profit business, the pay increase wasn’t instituted for completely altruistic purposes, and it highlighted some of the underlying issues affecting America’s labor force at the time.
The introduction of the Ford Model T heralded the era of the affordable automobile and the dawn of mass production, two aspects of the Second Industrial Revolution that are still very much with us today. But the assembly line production process that enabled Ford to churn out 200,000 examples of the Model T by 1913 also created monotonous working conditions for the Ford factory workers tasked with putting the vehicle together at the company’s factory in Highland Park, Michigan.
Henry Ford had greatly reduced the cost of producing the Model T and simplified the steps involved with making them, but that extremely impressive feat did not come without consequence. Ford factory workers weren’t terribly enamored with the extremely repetitive tasks assigned to them, and as a result, they either quit or expressed their dissatisfaction with the job by arriving late or skipping out on work when they could.
A chronically unreliable and demotivated workforce proved far too costly for Ford, as the company was forced to repeatedly hire and train replacements to helm the assembly line, which could not function without their contributions. Henry Ford figured a higher wage could function as an acceptable replacement for rewarding work, and thus the five dollar daily wage was born.
The move shocked the entire planet, as that level of compensation amounted to more than double what the average factory worker took home at the time. People soon rushed to Detroit in hopes of securing a position at Ford’s plant, and rival companies raised their own wages to prevent defections. Ford ended up getting the reliable workforce it wanted from the workers it did hire.
Even so, there were some strings attached with the $5 per day pay plan. That’s because it wasn’t so much of a pay increase as a profit sharing plan. So if a Ford factory worker made $2.50 per day under the previous pay setup, he would continue to make that wage under the five dollar plan. If the worker met all the automaker’s requirements, Ford added a bonus that made up for the difference.
Still, it was an enormously monumental event in American history. Ford factory workers were essentially petri dishes for the rest of the country, at least for a short while, but Henry Ford’s hypothesis that higher wages resulted in increased productivity was ultimately proven to be a sound one. It was an experiment that led to the blossoming of the American middle class. And it was a boon for Ford, which soon doubled its profits.
Image credit: The Henry Ford