Numbers

The Five-Dollar-a-Day Wage

After the introduction of assembly-line production in the period 1908-1913, Ford Motor Company began to encounter high levels of absenteeism and low morale among its employees.  This was due in large part to the boringness of the repetitive tasks performed on the line.  To improve the situation, Ford announced in January, 1914 that it would start to pay the then incredible sum of five dollars a day to assembly-line workers.  Robert Lacey in his history of Ford Motor Company, Ford: The Men and the Machine, wrote, “It was a pay rise so massive as to appear impossible, a defiance of the laws of gravity… ‘A blinding rocket through the dark clouds of the present industrial depression,’ declared the Cleveland Plain Dealer.  ‘A magnificent act of generosity,’ declared the New York Evening Post.  Some editorialists grew positively reverential.  GOD BLESS HENRY FORD, proclaimed a headline in the Algonac Courier over a story which described the carmaker as ‘one of God’s noblemen.’” (p. 118).

The reaction on the part of potential workers was immediate and enormous with reports that as many as 15,000 men seeking employment at Ford lined up daily at the Company’s employment office.  There are reports of workers traveling from all over the Midwest to Highland Park, Ford’s headquarters, hoping to be hired.

The reaction on the part of Ford employees was also dramatic.  “Within the plant the number of people quitting dropped by 87%, absenteeism dropped by 75%, and productivity rose by 30% or more.”—Andrew B. Abel and Ben S. Bernanke.  Macroeconomics.  Third Edition.  (Reading, Mass.:  Addison-Wesley, 1998), p. 409.

How It's Used

“Mr. Ford was by no stretch of the imagination a saint, or even particularly consistent. In his later years he would cut wages, and his company would have bitter confrontations with the fledging unions. But his $5-a-day wage was a transforming event. Within a week of Ford's announcement in January 1914, more than 10,000 job seekers descended on a Ford plant despite near-zero temperatures and blizzards, leading the police to turn fire hoses on the crowd in a failed attempt to prevent a riot.

“‘We want those who have helped us to produce this great institution and are helping to maintain it to share our prosperity,’ said James Couzens, Ford's treasurer at the time and the man many historical accounts credit with the idea of the $5 wage, in part as a motivational tool.”

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