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.