Sunday, November 13, 2011

The Ford myth

Readers of this blog have probably at some point come across the story that Henry Ford increased the pay of his workers to $5 per day so that they would be able to afford the products the Ford Motor Company produced. The story has a lot of appeal on the left, because it validates the approach of unions (higher wages are good for both the company and broader economy). But the notion that Ford made the move out the goodness of his heart rather than cold hard economic reality simply isn't true. As UC Berkeley economist J. Bradford DeLong notes:
Henry Ford would have been happy if he could have found qualified workers for his assembly lines at low rates of pay. But he could not. Work on Ford's emerging assembly line was brutal. Workers paid the standard wages for unskilled labor at Ford's Detroit factory--a little less than $2.00 a day--quit at astonishing rates. In one year, 1913, Ford had an average annual labor force of 13,600 and yet 50,400 people quit or were fired. 
Ford's solution was a massive increase in wages: to $5.00 a day for unskilled workers whose family circumstances and deportment satisfied Ford. By 1915 annual turnover was down to 16%, from 370% before the raise. Many to whom Ford jobs had not been worth keeping at $1.75 a day found the assembly line more-than-bearable for $5.00 a day. Many more linedup outside the Ford factory for chances to work at what appeared to them to be (and, for those who did not mind the pace of the assembly line much, was) an incredible boondoggle of a job.
Wikipedia offers up a similar explanation

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