Henry Ford pioneered the assembly-line method of automobile manufacturing, raised worker productivity, and shared profits with his workers through higher wages and benefits and shorter working hours.
In 1864, modern steel production began with the open-hearth process. Detroit’s location along the Great Lakes offered it a role in this new industry, and many foundries sprang up. In 1865, the first short stretch of pipeline carried oil along the Allegheny River. Cheap oil, steel, and transportation set the stage for Henry Ford to revolutionize the automobile industry.
Ford’s idol was inventor Thomas Alva Edison, whose methods produced the phonograph, incandescent electric lamps, and film for movie cameras. Ford’s imitation of Edison’s “tinkering” eventually led to the creation of the Model T automobile.
A row of completed Model T’s comes off the Ford Motor Company’s assembly line.
Henry Ford grew up on a farm, and he came to believe that too much needless work was being done, with too much duplication of effort. As a young man, he spent several years in Detroit learning mechanics. He later returned to his farm, where he spent his spare time working on the idea of building an internal combustion engine. His first invention was a steam-operated tractor, and by April, 1893, he had completed work on his first automobile.
Other inventors who were working on automobiles saw them as a fad and a luxury. In contrast, Ford dreamed of mass-producing inexpensive cars. Consequently, few bankers and investors of his era were willing to finance his company. They considered him an eccentric, but Ford was ahead of his time. One man, Alexander Malcomson, had faith in Ford’s dream. He put up $25,000 of his own money to finance Ford and also convinced others to invest. Malcomson became the first vice president of Ford Motor Company.
Like most businesspeople of his time, Ford was influenced by Frederick Winslow Taylor’s
When Ford began making cars, each car took more than a day and a half to build. By introducing and perfecting the use of the assembly line, the company eventually was able to produce one car every twenty-nine seconds. With each incremental increase in efficiency, profits soared. As early as 1905, Ford began sharing profits with his workers. In 1913, he was able to pay workers a total of ten million dollars over and above their salaries. He saw workers and management as partners in production, and he tied profit sharing to employee efficiency.
In 1914, Ford was well known in and around Detroit and the Midwest, but neither he nor his cars were known nationwide. On January 5, 1914, the Ford Motor Company released a statement nationwide announcing the introduction of a five-dollar, eight-hour workday for Ford workers, beginning on January 12. Most of the fourteen thousand workers at Ford’s Highland Park (Detroit) plant worked nine hours a day for a little more than two dollars a day before the change. By January 14, 1914, Ford was the best-known man in the United States, and workers across the nation saw him as a hero. He became a national celebrity, and people around the world engaged in avid discussions of Ford, his assembly techniques, and his wage policies. Some observers consider his announcement one of the greatest publicity stunts in history.
Ford did not automatically grant every employee the pay raise and hours reduction following his announcement; to be eligible, an employee had to meet certain qualifications. Ford established a sociological department, headed by Dean Samuel Marquis,
Why did Ford raise wages so dramatically? He claimed that he wanted to lift workers out of poverty. The surplus value of his workers’ labor had made him rich, and he saw the workers as partners in his own progress. He believed they were entitled to share in the benefits of the wealth that they helped create. He also believed that the U.S. economy would grow faster if workers could afford to buy the products they made. With higher salaries, workers would be able to buy Fords, expanding the market for his products. Ford argued that higher wages would also make workers pay more attention to their work and improve the quality of the cars produced. If Ford’s customers were happy with their cars, they would continue to use Ford cars and encourage others to buy them. Raising wages improved quality control by encouraging each worker to monitor the quality of each product that passed his workstation, as workers now shared profits and profits depended on quality.
Henry Ford understood business. He estimated that the five-dollar day would add ten million dollars to his annual payroll. Some experts claim that he had no choice, that he was forced to raise wages to attract labor in a market that was short of workers. Immediately following the announcement of the five-dollar day, men hoping to be hired formed huge lines outside the Ford plant. The company’s chief of security, Harry Bennett, turned fire hoses on crowds of job seekers in subzero weather, but this did not stop them from coming. They merely changed into dry clothing and returned, insisting on jobs. More than ten thousand people thronged Ford’s plant in Highland Park for weeks, hoping to participate in the five-dollar-a-day workers’ heaven that Ford had created. If the announcement was designed to attract labor, it worked extremely well and gave Ford his pick of the best labor available.
Other labor analysts assert that Ford’s problem was not a shortage of labor but high turnover rates. In 1913, Ford Motor Company hired 50,448 workers, yet its average labor force was 13,623. The company thus had a turnover rate of 370 percent. Vacancies could have been a real problem if filling them had been difficult, but it never was. More than 40 percent of the jobs in the Ford plant took only one or two days to learn and were designed to be taught rapidly to unskilled laborers. Another 36 percent of the jobs took one week or less to learn. Under these circumstances, it is unlikely that Ford introduced the five-dollar day to reduce labor turnover, although turnover did decline dramatically.
Still other observers argue that Ford had to pay higher wages to get workers to work harder. As machines drove men to their breaking point, workers resented being treated like machines and would seize every opportunity to shirk work or remain idle. Ford’s high wages gave them an incentive to work hard—they knew they could not earn such high wages elsewhere, so to hold on to lucrative jobs, they would drive themselves to the limit voluntarily. The trouble with this theory is that Ford’s laborers worked on automated assembly lines, where machines dictated the pace of work. Ford had conducted time-and-motion studies to determine precisely how fast the men could work, and the machine speed was set accordingly.
Some experts argue that Ford introduced the five-dollar day because the company was vulnerable to work stoppages. Ford’s profits hit $13 million by 1912, $27 million in 1913, and $32 million in 1914. The opportunity costs of work stoppages would be very high, because Ford’s assembly techniques created huge profits from labor, even though the Model T, the main Ford product, sold for less than $600. For example, it is estimated that a one-week shutdown of Ford’s plants in 1913 would have cost the company at least $542,000 in lost earnings. Shutdowns of the same duration would have cost the much more diversified General Motors Company less than $184,000 and Studebaker, another competitor, less than $43,000. Ford’s competition would have been delighted to see Ford rapidly lose profits and perhaps its share of the market.
In short, Ford’s labor force was the source of its prosperity as well as its weak spot. Many Ford workers had recently immigrated to the United States in the hope of making better lives for themselves and their children. Life in Detroit’s crowded low-income neighborhoods made them particularly vulnerable to appeals by labor unions,
Fear of industrial unrest permeated the minds of automobile executives throughout late 1913 and early 1914. Ford Motor Company executives were no exception. Charles Sorensen, head of production at the Highland Park plant, said in one interview that he was ordered to pay workers wages of five dollars a day in order to stifle the IWW and other unions. This, Sorensen claimed, was Ford’s means of taking away from the unions their greatest source of appeal—the desire for material gain and benefits. Ford simply co-opted the unions’ strategy, not only by offering workers high wages before the union could demand them but also by offering wages higher than any union organizer would have the nerve to demand.
Other automobile companies did not follow Ford’s lead for many years. Nevertheless, the results of the five-dollar day for Ford were clear. The labor force became much more stable, total production costs declined, and workers volunteered many cost-cutting ideas to management, whom they saw as partners rather than as adversaries. Laborers feared losing jobs that paid so much above the industry average, and there is little evidence of labor unrest at Ford Motor Company during this period. Ford claimed that the five-dollar day reflected the growing productive power of his labor force. As they demonstrated to him that they were capable of creating more wealth, he was willing to offer them ever-larger amounts from profits.
The five-dollar day was also part of a larger change in workers’ lifestyles. Ford checked on his workers’ personal hygiene and the cleanliness of their homes, encouraged them to form good savings habits, and rewarded stable, wholesome family life. These actions were not motivated solely by greed or the desire to reduce the number of workers who could share profits; Ford attempted to create a better world.
Ford not only raised workers’ wages but also built hospitals for workers. He once ordered his plant managers to hire older workers when it was brought to his attention that they were underrepresented in the company’s workforce. Ford also ordered plant managers to conduct complete studies of every job in his factories to determine which could be performed by the blind and people with disabilities. He wanted these jobs to be allocated to such workers because he believed they could earn the same wages as others if given a fair chance. In addition, Ford routinely hired ex-convicts; he sincerely believed that reform was possible and that, given the chance to earn a good living under acceptable circumstances, most would abandon a life of crime. He also hired teachers, at his own expense, to teach his workers proper English and the fundamentals of good citizenship in a democracy.
Ford’s declaration of the five-dollar workday gave all American workers greater bargaining power, even though most employers attempted to resist this trend. Collective bargaining did not come to the Ford Motor Company until after Ford’s death, when Henry Ford II and his group of “whiz kid” advisers recognized labor unions. Henry Ford’s pay increase helped avoid unionization in his plants. By raising the absolute material standards of many blue-collar workers, however, he also forced American society to place a higher value on such work. The five-dollar day brought many of these workers into the middle class by virtue of their income. Many aspired to improve their children’s education and offer them better opportunities in life. Higher wages made it easier for factory workers to achieve these goals, as well as to buy better homes in more expensive neighborhoods. In these settings, their children played with children from middle-class, well-educated families and began to acquire the values, attitudes, and tastes of the middle class before they acquired traditional middle-class educational credentials and jobs.
The five-dollar day made workers aware of the fact that they were worth more because they could produce more with the help of machines. Consequently, the modernization of industry became less difficult. Rather than feeling alienated from machines, workers began to associate better standards of living and benefits with the increased output of labor that machines made possible. Perhaps this explains why Ford’s workers often designed new machines for the company: Every effort to improve the efficiency and productivity of workers in the Ford plants would be rewarded. Ford frequently promoted such workers and publicized the promotions widely. The five-dollar day was a turning point in history, for it publicly recognized and rewarded labor’s increasing value and the right of workers to share the profits created by their labor. As a result, the growth of industrialization proceeded more smoothly, as some of the public’s hostility toward this trend was eliminated.
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Bennett, Harry. We Never Called Him Henry. New York: Fawcett, 1951. Many blame the brutal treatment of some Ford employees on the heavy-handed tactics of Harry Bennett. In this book, Bennett argues that at all times he was acting under direct orders from Henry Ford. A bitter book that is critical of Henry Ford and portrays Ford as an industrial dictator. -
Brough, James. The Ford Dynasty: An American Story. Garden City, N.Y.: Doubleday, 1977. A wonderfully imaginative book full of narrative and dialogue woven around accurate historical details. Brings the history of Henry Ford, his family, his friends, and his company to life. -
Collier, Peter, and David Horowitz. The Fords: An American Epic. 1987. Reprint. San Francisco: Encounter Books, 2002. Details the rise of the Ford dynasty over three generations and the conflicts that almost tore the family apart. Portrays Henry Ford as generous and optimistic yet intolerant, cranky, and bitter. -
Ford, Henry, with Samuel Crowther. My Life and Work. 1926. Reprint. Whitefish, Mont.: Kessinger, 2003. Ford’s autobiography is full of pithy sayings that capture his philosophy of life and business. His view of the five-dollar day is that it was the best business decision he ever made. A great source for Henry Ford’s view of the origin and growth of Ford Motor Company. -
Hooker, Clarence. Life in the Shadows of the Crystal Palace, 1910-1927: Ford Workers in the Model T Era. Bowling Green, Ohio: Bowling Green University Popular Press, 1997. Examines how the first large Ford auto plant—known as the Crystal Palace—changed Highland Park, Michigan, the first U.S. city to depend entirely on the automotive industry for its well-being. Discusses Ford’s production processes, the development of a new “manager class,” and the work of Ford’s sociological department. -
Lacey, Robert. Ford: The Men and the Machines. Boston: Little, Brown, 1986. A rich account of the public accomplishments and private tragedies of four generations of the Ford family. Portrays Henry Ford as a complicated man, at once a pacifist and a war profiteer; a champion of minority rights and an anti-Semite; a dedicated family man who supported a wife, mistress, and illegitimate son; and a loving father who bullied and hounded the son he loved into an early grave. -
Nevins, Allan. Ford: The Times, the Man, the Company. New York: Charles Scribner’s Sons, 1954. Most historians consider this the standard reference work on Henry Ford. It is still among the most exhaustively researched works available on Henry Ford. -
Sinclair, Upton. The Flivver King: A Story of Ford-America. Detroit: United Automobile Workers of America, 1937. A very imaginative and entertaining pocket novel about several generations of a family that works for Henry Ford. Sinclair portrays Ford as a man who began with idealistic purpose but was corrupted by money, power, and greed. In Sinclair’s view, the five-dollar day did little to soften the dehumanization of the worker. -
Sward, Keith. The Legend of Henry Ford. New York: Holt, Rinehart and Company, 1948. Even-handed and meticulously researched study explores and explodes many myths, such as the notion that Ford always put profits before principle. Demonstrates that Ford was both a great businessman and a principled person. -
Watts, Steven. The People’s Tycoon: Henry Ford and the American Century. New York: Alfred A. Knopf, 2005. Full-scale biography of Ford relates his rise from farm boy to billionaire and examines all of the contradictions the man embodied. Places Ford’s accomplishments in the context of the early twentieth century. Includes index.
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