As the debate over increasing the Federal Minimum Wage continues and politicians and economists argue about its ability to either stimulate or further stagnate the US economy, it might be a good time to look at this month’s 100th Anniversary of an Underappreciated Date that changed America: January 5, 1914, when Henry Ford more than doubled the daily wages of his factory workers.
In 1913, productivity in the automobile industry was increasing due in no small measure to the introduction of the moveable assembly line. However, the industry was in a recession and beset by a workforce that could not be depended upon to ‘stay put’ or to stay out of labor unions. Ford’s wage innovation sent Detroit into a tailspin. The Wall Street Journal wrote that he brought “biblical or spiritual principles into a field where they do not belong.” At a time when most workers in the industry were making $2.34 a day, Ford’s workers’ wages were increased to $5.00 a day. There are many theories as to why he decided to do so, but there seems to be a consensus on the central reason; a desire to insure a stable work force. After all, training a constantly changing work force was expensive. Luckily, his innovation worked. The rate of turnover fell from 370% to 16% in 1915 and profits doubled to $60 million from 1914 to 1916.
This is not the end of the story. Ford also had strong prejudices about what kind of workers he wanted in his factories. To find and keep those workers whose values he deemed ‘sound’ he gave the wage increase only to those who passed strict tests for sobriety, family life, self-control, self-respect and responsibility. Insurance, owning a home, a savings account and marriage were part of this ‘wholesome’ equation and were enforced by a strong network of ‘investigators’ and ‘enforcers’.
Did this wage increase also allow the ‘average man’ to increase his purchases of Ford’s cars as many have assumed it did, helping to create the consumer society were are immersed in today? This argument seems to be a bit more debated, although there is no reason to conclude that having more money in your pocket didn’t make consumer purchases of all kinds easier to do, while simultaneously lowering employer labor costs. Ultimately, the notoriously anti-union Ford made a decision that, along with 1930’s Federal labor policies, the rise of the Left and industrial unionism and the post World War II economic boom, eventually helped create the American Middle Class, decreasing the wealth disparity between the rich and the poor to a level we have not seen since the early 1970’s.
- Marc Levitt, Host & Co-Executive Producer