Ford Doubled Wages in 1914 to Stop Workers From Quitting

On January 5, 1914, Henry Ford and his vice president James Couzens told reporters at the Highland Park plant that the daily minimum wage was going to $5. The previous floor was $2.34 for a nine-hour shift; the new one was $5 for eight. The papers treated it as charity. It was not.

Ford's problem was that nobody wanted to stay. Internal records put the 1913 annual turnover rate at about 370 percent. To grow the workforce by 100 men in a year, the company had to hire roughly 963 of them, train them, and watch most walk off. Sociologists Daniel Raff and Lawrence Summers, working with Ford's payroll archives in the 1980s, concluded that the wage hike was an efficiency-wage move: pay enough above the market that quitting becomes expensive, and absenteeism drops with it.

The moving assembly line, which Ford had switched on in 1913, was the source of the bleeding. The line broke car-building into rote tasks anyone could learn in an afternoon. That was the point. It was also unbearable. Skilled workers who had taken pride in finishing a car now stood in one place and tightened the same bolt for ten hours.

The morning after the announcement, a crowd of applicants formed outside the factory gates in single-digit Detroit weather. Within days the crowd ran into the thousands and the city turned fire hoses on it to break it up. The wage worked. Turnover dropped to a fraction of the 1913 level the next year, and the line kept running.

Ford's biographers like the philanthropic version of the story, the one where the boss decides his workers should be able to afford the cars they build. The payroll data tells the other one. He raised wages because the line he had just built was driving people out the door faster than he could replace them.