Photo is from all-len-all.com showing the Ford assembly line in March of 1914.
In the summer of 1960 I began my first employment for wages. I had previously worked at various jobs including mowing lawns, delivering newspapers as a relief newsboy, shoveling snow, and other odd tasks. I was hired by the Holyoke Public Library for the astronomical sum of $.85 per hour. I was a very good employee. I was so good that within a matter of a few weeks I was given a 16% raise in my wages. Alright, maybe that raise was due to an increase in the minimum wage.
The federal minimum wage was established in October of 1938 and set at $0.25 per hour. There are exceptions for certain employees, including full-time students, employees under the age of 20, and those who receive tips. Most employees who receive the minimum wage are just entering the workforce. In 2013, the employees who were paid at or below the minimum wage comprised less than 4% of the workforce.
A living wage is defined as the wage that can meet the basic needs of an individual in order to maintain a safe, decent standard of living within the community. The living wage differs from the minimum wage in that the latter is set by law and can fail to meet the requirements to have a basic quality of life and may leave the family to depend on government programs or other sources for additional services.
One hundred and two years ago, on January 5, 1914, the Ford Motor Company announced that it would begin paying a living wage of at least $5.00 for a day’s labor. In addition, the company reduced its standard workday from nine hours to eight hours. The previous daily rate of pay had been $2.34 for a nine hour workday.
The story is told that Henry Ford wanted to pay his workers enough money so that they could afford to purchase the product they were making. This would supposedly allow him to increase the market for his products. This may seem reasonable for toasters, but it is not feasible if the employees are manufacturing yachts.
Production did increase 19% from 1913 to 1914, but I don’t believe this increase was due to purchases by Ford employees. The production increased 32,456 units, from 170,211 in 1913 to 202,667 in 1914. At the time, Ford had 14,000 employees and I doubt that each bought 2.3 cars that year. Rather, there were two other significant factors at work.
The first was automation. In January of 1914, his continuous-motion system reduced the time to build a car from 12.5 hours to 93 minutes. But the pace was so demanding, and repetitiveness of the job was so mind-numbing, that many workers found themselves unwilling to withstand it for eight hours a day. It did not matter how much they were paid.
This fed into the second factor which was employee turnover. It costs a lot of time, money and effort to train new employees as any business owner or manager will tell you. Some employees just walked off the assembly line which shut down production. Ford also instituted new hiring methods to identify the best employees. His methods worked, reducing turnover of the workforce.
The $5.00 per day rate was not all paid in wages. It was about half pay and half bonus. The bonus was dependent upon character requirements and these requirements were enforced by the Socialization Organization. This was a management committee that would visit the employees’ homes to ensure that they were doing things the “American way.” Employees were supposed to avoid social vices such as gambling and drinking. They were required to learn English, and many employees (primarily recent immigrants) were required to attend classes to become “Americanized.” Women were not eligible for the bonus unless they were single and supporting the family. Men were not eligible if their wives worked outside the home.
Production skyrocketed to 308,162 in 1915. This was a 52 percent increase in a single year! In 1916 they produced over a half-million units, and Ford raised wages to $6.00 per day. Over 735 thousand units were produced in 1917. Production decreased during World War One, but by 1920 the company was producing over 1 million cars each year.