It was on this day in 1914 that Henry Ford announced that he would pay his workers $5 for an eight-hour workday, up from an average of $2.34 for a nine-hour workday. This announcement was met with disbelief and criticism. The financial editor of the New York Times ran into the newsroom and said in a whisper: “He’s crazy, isn’t he? Don’t you think he’s crazy?” The Wall Street Journal accused Ford of bringing “biblical or spiritual principles into a field where they do not belong.” People were convinced that Ford would go bankrupt, and that the city of Detroit would collapse.
James Couzens, a Ford executive, said: “We want those who have helped us to produce this great institution and are helping to maintain it to share our prosperity.” However, Ford’s decision was primarily an economic one. He was experiencing high turnover rates, and on any given day 10 percent of the workforce didn’t show up. Men would sometimes walk away midday when they were sick of the job, which halted the entire assembly line. Ford identified two main reasons for his labor changes: he wanted to retain good workers who were invested in the company, and he wanted his workers to earn enough that they could buy their own automobiles.
Ford had built all sorts of strict rules into his plan; in order to earn the full five dollars a day, the men had to be sober, clean, not gamble or abuse their families, learn English (if they were immigrants), contribute to a savings account, and their wives could not work outside the home. A committee would visit employees’ homes to make sure they were following the rules. Despite these conditions, on January 12th, when the pay increase took effect, an estimated 12,000 job seekers waited in line outside the Ford plant … despite the fact that it was close to zero degrees in Detroit that day.
Ford’s big idea paid off. Not only did turnover and truancy drop drastically, but between 1914 and 1916, the company’s profits also doubled from $30 million to $60 million.
From: The Writer’s Almanac, Jan. 5.2016