As many Blue Oval fans are well aware, Ford has been quite the pioneer in the automotive segment, having developed the Model T – making automobiles affordable for everyone in the process – as well as creating the assembly line, which revolutionized the entire industry. Most are also aware that shortly after the implementation of the assembly line in Ford factories, company founder Henry Ford announced that each employee at the automaker’s Highland Park plant would receive a substantial raise – now known as the $5 workday – which just so happens to have taken effect 110 years ago this week.
Ford effectively doubled its workers previous earnings at the Highland plant in the form of a profit sharing bonus that was announced on January 4th, 1914, at which time the company also cut its workday from nine hours to eight and added a third shift to boost productivity. The implications of this move were both immediate and long-lasting – the day after it was announced, 10,000 people lined up outside the Highland plant looking for work, while Ford’s absentee rate fell from 10 percent to less than one percent by 1916 and turnover plummeted as well.
As a result, Ford workers were able to save more money and buy nicer homes for themselves, helping to solidify Henry Ford’s philosophy that an employee is better able to focus on the demands of the job if their home life is free of worry. The $5 workday wage soon spread to other Blue Oval plants and quickly grew over the years, and other companies – not just those in the automotive sector – followed suit, helping to coin the term “Fordism” – meaning production on a grand scale performed by highly paid workers.
“No one loses anything by raising wages as soon as he is able. It has always paid us,” Henry Ford said. “Low wages are the most costly any employer can pay. It is like using low-grade material – the waste makes it very expensive in the end. There is no economy in cheap labor or cheap material.”