On Henry Ford and his $5 a day
Written by Tim Worstall
It's a fairly common trope in US lefty land that Henry Ford and his $5 a day wages back in 1913 marked a huge change in labour relations. He was moved to raise wages so high (approximately double the prevailing wage) so as to help create a market for his own products.
This is an interesting thought, certainly, but not one that stands much examination. That year his establishment of workers was some 14,000 head: his sales some 170,000 and that's just the year that he started ramping up production through the moving assembly line (reaching 500,000 in a couple of years and near a million within a decade). The spending power of his workforce was entirely marginal.
No, the real value to Ford of his high wages was, as with the living wage we looked at yesterday, that he was paying higher wages than his competitors. Twice what his competitors were paying in fact. In 1913 he had a turnover of over 50,000 workers to keep that establishment of 14,000. Paying hugely higher wages than everyone else in the nascent manufacturing industry of the time meant that he lowered turnover, thus recruitment and training costs.
We might also note that he wasn't in fact paying higher wages: he was offering a bonus, a highly conditional bonus:
The $5 a day rate was about half pay and half bonus. The bonus came with character requirements and was enforced by the Socialization Organization. This was a committee that would visit the employees' homes to ensure that they were doing things the American way. They were supposed to avoid social ills such as gambling and drinking. They were to learn English, and many (primarily the recent immigrants) had to attend classes to become "Americanized." Women were not eligible for the bonus unless they were single and supporting the family. Also, men were not eligible if their wives worked outside the home.
The stories we're told about matters historical often don't stand up to all that much detailed scrutiny which is why they are more properly referred to not as history but as legends: highly partisan legends.
adamsmith.org |
