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Comment: Henry Ford would have liked this victory a lot.

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SteveMT's picture

Henry Ford would have liked this victory a lot.

[Why did Ford voluntarily more than double wages? Answer: He did it to actually save money!]
Ford did indeed raise wages in 1914 from $2.25 a day to $5 a day. But he most certainly didn't do it so that his workers could buy his cars. Even at first blush it seems most unlikely: he had some 14,000 workers and was selling 170,000 cars a year. The extra demand, even if all of those workers bought a new car every year, was never going to be anything more than entirely marginal.

But we can take this further: the Model T cost around $500 at the time. So, his maximum possible extra sales were $7 million. But how much is that extra wage bill? 14,000 by $2.75 by 250 working days a year comes to $9.625 million.

Ford's found that, to have a permanent establishment of 14,000 people, he was getting through a turnover of 52,000 workers in a year. He was spending vast amounts in trying to recruit, in training, in stopping the production line when people simply walked off the job. So what did he do?

No, he didn't simply raise wages. He made sure that he was paying more than everyone else. That was the point, to make those who had jobs at Ford more loyal, to have lower staff turnover, to enable him to pick and choose and get the cream of the crop. It's entirely likely that his total labour costs went down even as he was paying each individual worker more.