Eight things worth knowing about Henry Ford and the five-dollar day

With the 100th anniversary of the five-dollar day this past week, Henry Ford’s revolutionary move was back in the news, briefly. Here’s a little more to the story. 

 

 

On January 5, 1914—a century ago last Sunday—the Ford Motor Company introduced the five-dollar day. Historians and business theorists are still arguing the implications of Henry Ford’s historic move, and even what the automaker was attempting to accomplish in effectively doubling the pay of his workforce. Did Ford employ what economists call efficiency wage theory? Or did he have a greater social experiment in mind? The debate continues to this day.

 

 

There’s no debate about this: Ford was both a brilliant and complicated man, and as stubborn as he could seem, his views continued to evolve throughout his life. Countless scholarly papers have been written about the five-dollar day. However, this isn’t one of them. Here are simply a few interesting facts about a critical moment in America’s industrial and social history.

 

+   The five-dollar day was not simply nor truly a pay raise scheme, but an employee profit-sharing program—as noted in the 1914 newspaper headline above. “This is neither charity nor wages, but profit sharing and efficiency engineering,” said Ford in announcing the plan. In his stated view, distributing profits to workers was of a piece with increasing dividends to shareholders and lowering prices to consumers—and all were the result of greater production at lower cost.

+   With the explosive sales of the Model T, Ford’s workforce was growing at a fantastic rate: around 2500 in 1910, over 13,000 by January of 1913. Ford’s profits were also growing exponentially. In 1913, the company netted $27 million, a figure that doesn’t really translate into modern dollars, but at the time it represented fabulous, Midas-like wealth, on the scale of a Rockefeller or Gates.

+   Between 1900 and 1920, the population of Detroit doubled and then tripled to meet the demand for factory workers, most of them recent European immigrants. The instruction signs in the Highland Park Ford plant were painted in six languages. However, many could not adapt to the new type of work—indoor, stationary, tedious—and the turnover was tremendous. Soon, Detroit also had one of the largest skid rows in the world.

+   Before Ford invoked the five-dollar day, in 1911 Percival Perry at Ford of England established a similar system for workers at the Trafford Park plant, with wages far greater than the prevailing rates. At the time, British factory workers labored under even more desperate and impoverished conditions than in America. Was Ford inspired by Perry’s initiative? Did Ford and Perry influence each other? It’s not clear.

+   Ford not only raised wages with his 1914 plan; he cut the mandatory workday from nine hours to eight. This step in turn allowed the Highland Park Model T plant to increase from two shifts per day to three. The new system also reduced the number of pay grades from over 65 to eight, and established payroll authority in a central office. Ford despised piecework and the petty despotism of floor bosses.

+   While the five-dollar day was cheered in some quarters, it was bitterly opposed in others. The Wall Street Journal attacked Ford for his interjection of what it called “Biblical or spiritual principles into a field where they do not belong.” Social scientists of the time warned that higher wages and shorter working hours would only give workers greater opportunities for drinking.

+   A story goes that sometime in 1913, Ford was walking the factory floor with his son Edsel, then 20, when they came upon a brutal fistfight between two employees, evidently over work or wages. Deeply shamed by Edsel’s witnessing of the episode, some say, Ford resolved at that moment to improve wages and conditions.

+   On New Year’s Day in 1914, as the company’s officers met in Ford’s Highland Park office to plan their new employment strategy, Henry Ford wasn’t the only progressive-minded man in the room. Also present were James J. Couzens, Ford’s number two, who would later become a U.S. Senator from Michigan and a supporter of FDR’s New Deal, and John R. Lee, one of the first modern personnel managers and the man tasked with executing Ford’s employment theories. Who was the originator of the plan that became known around the world as the five-dollar day? Though Couzens and Lee provided their input, there is a consensus among those who were in the room that day. The man who conceived the idea, and who was the relentless, undeterrable force behind it, was Henry Ford.

 

 

21 thoughts on “Eight things worth knowing about Henry Ford and the five-dollar day

  1. I’d forgotten about the $5 day. The 20th Century may have been a very different experience without Ford’s influence.

  2. Henry Ford was no saint. He had an active and long standing policy of not employing black people or jews in any of his factories. He was also a supporter of the Nazi Party and actively sought to influence the American government to take an isolationist stance to the war then raging in Europe And when America did finally enter the war, Ford, hypocrite that he was, had no qualms about profiteering from America’s involvement. It was because of Henry Fords actions, that the American government was eventually forced to recall Ford’s son from active duty in order for him to take over running Ford from his father

    • I agree that Ford was no saint. However, some of these familiar charges are not accurate. He was indeed an enthusiastic anti-Semite for part of his life and he directed his paper, The Dearborn Independent, to publish the Protocols of the Elders of Zion, a notorious fraud. But it is not true that he banned Jews and blacks from his plants. In fact, he was the first of the major companies in Detroit to hire African-Americans–yet at the same time, he employed them mainly at the most menial (janitorial) or grueling (foundry) jobs, a practice that would also be employed by the rest of the Detroit shops. The auto plants were not really integrated until WWII, a development forced by the labor shortage. HF’s son Edsel died in 1943. It was his grandson, HF II, who returned from Navy service to take over when HF I became too weak and senile to lead. HF I was a complicated person, neither sinner nor saint. He began his career as a progressive and visionary and ended it bitter and isolated. It helps to remember that he was born in the middle of the Michigan frontier in 1863 and except for grammar school, entirely self-educated.

      • I have to disagree with your assertion that Ford did not have bans on employing black or jewish people. These bans are well documented, both in the Ford Motor Company’s own official records and from reputable independent sources of the times. When Ford did eventually employ black people, he did so only because he was forced by the government of the day to do so. I stand corrected about which Ford family member took over the running of the Ford company, but other than that everything I’ve said is essentially correct and backed by the historical record

  3. Further to my previous post, two of Fords more unsavory employment policies were that to be employed by Ford, employees were expected to meet and conform to specific social standards, and to ensure those standards were complied with, Ford had a special department called the Social Department whose sole role was to go around spying on Ford employees private life activities to ensure those “requirements” were adhered to. And two, Ford had another special department whose sole role was to stop trade unions organising amongst Ford workers. This department was given free reign to use any method it wished, to stop the unions with its main weapon being the use of direct violence against union organisers. Ironically it was one of these violent actions against a union picket line and the intense public outcry over the tactics by Ford which ultimately forced Ford to close this department and seek peaceful negotiation and agreement with the union.

    Now some will argue these things were done in Ford’s name without his personal knowledge or approval, however the historical record indicates Ford was fully aware of such endeavors and tacitly gave his approval for them to take place

    As for his five dollar a day benevolence to his employees, Ford’s motivation wasn’t altruistic but rather done in order to benefit Ford financially long term. The motivation essentially being that if Ford paid his workers higher wages then the extra money they would have could then be used by those employees to purchase a new Model T Ford thus creating more wealth for Ford personalty And even this five dollars a day scheme wasn’t universal, being only available to employees who met specific criteria.

      • I make no judgments as whether Ford was villain or hero.
        I merely present that which is found on the historical record and leave others to draw their own conclusion.
        However, to be blunt, the picture the historical record paints of Ford is particularly unappetizing to say the least. And as is the case with such historical figures we can only base our assessment of such figures on what we find in the contemporary record of the day.

  4. He was no hero. There’s some pretty good revisionist history going on in this page.

    Here’s a bit of on-the-ground history. My father graduated from U of M in 1950 with a degree in advertising, but not a single ad agency in Detroit would hire a Jew for fear of not getting, or keeping, Ford’s work. When I came along 2 years later he was still resorting to reading the birth announcements in the Jewish News to taking baby pictures to feed his family. Ford’s hatred had a ripple effect that was felt across all industries.

    One oddity, though. There was a local Rabbi that received a new car from Ford every couple of years, like that could assuage his guilt.

    I must say though, that his family realized his misdeeds and have done many things to offset his cruelty and hatred of anyone that didn’t look exactly like his family.

    • “There’s some pretty good revisionist history going on in this page.”

      What exactly are you referring to? It was clearly acknowledged that he was an anti-Semite.

  5. Several comments were deleted. Keep it civil and substantive and avoid personal attacks. I’ve spent too much time on this website to let a couple of soreheads ruin it.

  6. Agree with the assertion he was complex. As the son of a farmer, he hated the menial backbreaking nature of the work, and sought machines to do it for him. Sadly, Ford was only one of many industrialists who held views that were noxious to the freedom that the auto was supposed to provide. He was selective in his prejudice; he revered Albert Khan, a Jew, whose architecture still dots the city to this day. Like many men of the era, Khan felt that factory work would lift up man from the drudgery of agriculture, most prominently seen in his use of large banks of windows to provide as much natural light as possible. (Of course, at the time, window washers were cheap, and so was the heat!)

  7. “Henry Ford had a policy of refusing to employ Jews and Black people in his factories.” – possibly well-intentioned reader

    The main problem with this claim is it’s not true, and it is important to know the real history.

    In fact, Ford was the earliest and largest employer of African-Americans among the major Detroit automakers. For example: In 1926 there were 11,000 black men working in the Detroit plants, 6,000 of them at Ford Rouge (around 11 percent of its workforce). Various theories have been suggested for Ford’s policy, including lower turnover as black workers simply had fewer opportunities elsewhere. Also, a key theory in labor economics, wage arbitrage: maximizing profits minimizes discrimination. Simple good business.

    But make no mistake: these men were not treated equitably by the company nor by their fellow workers. They took the toughest and dirtiest jobs with little chance of advancement. These men faced struggles we can hardly imagine, overcame tremendous obstacles, and helped to create Detroit’s African-American middle class. As one of the few opportunities open to African-Americans, work at Ford played a central role in the Black community in the city. These workers were trail breakers, just like Jackie Robinson, but with far less glory and compensation. Their role in history should be honored and respected.

    But if we rewrite history with false claims — for example, that Ford never employed black people in the first place — then none of this ever happened. We have expunged these men from the record. It’s like they never existed. All their accomplishments and experiences are erased too, from the Urban League to the Birwood Wall. What a shame it would be to disrespect these men in this manner, and for the American experience to be robbed of such an invaluable lesson.

    That’s not going to happen at Mac’s Motor City Garage.

    • I may be one of the posts you have deleted. If so, I take no offense. It is not my intention, nor will it ever be, to cause offense or hurt to anyone else We live in a world already deeply divided by stupid prejudices and wide spread hatred towards each other, I have absolutely no wish to ever add to that

  8. As always, thanks for the great history. I never heard of the Birwood wall so I googled it. Oh. My. God.

    I lived in Detroit area half my life and I never heard of it. Please write a story about this.

  9. It’s easy to look back with modern eyes and villanize people in the past it was a different time with less so called enlightened veiws of today Henry ran his company and his employees according to the beliefs and practices of the time improving what he seen needing it and trying to prevent what he saw damageing to his goals as far as unions for a time they helped the American work force now they seem to only serve themselves not the people they represent maybe Henry seen this and didn’t want that for his employees

  10. Several hard facts are left out. Henry Ford hired more Arabs than anyone which is why Highland Park and Dearborn, Michigan have always had the highest concentration of Arabs in the USA. This was the polar opposite of his sentiment toward the Jews. The reason Henry hired Albert Kahn was because Kahn’s genius for building Industrial and commercial buildings was already proved with the Packard and Essex plants, Willow Run, the Fisher Building and a host of others in and around Detroit. Their relationship was strictly business. Ford hired Kahn, Kahn did the work and Kahn got paid.
    Ford kept Dearborn a closed community to black housing (but not Arab). Instead, Henry poured big bucks for black housing into Inkster, Michigan which was due west on Michigan Ave. from The Rouge and away from Detroit. Black Ford workers did not initially back the UAW. For this fact, HF gave special consideration to all anti-union workers. Henry’s personal kitchen workers were Polish and Ukrainian women, nearly exclusively in WHQ cafeteria.

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