Henry Ford's pro-family initiative that rocked the world
One hundred and ten years ago this week, a Motor City magnate put his money where his mouth was.
On 5 January 1914, Ford Motor Company doubled the wages of employees to $5.00 per day, incentivising assembly-line work. It was Henry Ford’s idea.
The Detroit Journal’s headline “Henry Ford Gives Ten Million in 1914 Profits to His Employees” resonated worldwide. This innovative profit-sharing was a stunning example of noblesse oblige in the industrial age. The next day, 10,000 men besieged the Ford plant looking for work.
Ford’s business partners, brothers John and Horace Dodge, held 10 percent of the company. They were furious. Such a substantial wage increase would cut into profits. Ford’s response: 1) We’re already rolling in dough. How much more do we need? and 2) I don’t want any man who works for Henry Ford to be where his wife must work outside the home.*
The next year, Ford’s production increased almost 20 percent. Profits doubled in two years. Other automakers had no choice but to also raise wages, making Ford's wages the industry standard. Within a decade, Ford was producing over 9,000 Model Ts daily.
Ford announced, “At one stroke, we will reduce the hours of labour from nine to eight and add to every man’s pay a share of the profits of the house.” One critic pronounced it “The most foolish thing ever attempted in the industrial world.”
Henry Ford didn’t do this out of the goodness of his heart. He was, after all, a shrewd businessman. But neither was he an archetype of today’s sociopathic Economic Man. He was a civic-minded American patriot with the foresight to understand that a fair deal was a good deal.
Ford had revolutionised production with the first moving assembly line, propelled by conveyor belts. In six months, the time required to build a Model T shrank 40 percent from 9 hours, 54 minutes to 5 hours, 56 minutes.
Keeping up with the line was tedious, back-breaking work, and over 52,000 men were hired every year to maintain a 14,000 workforce. That’s a 370 percent turnover rate. New employees required extensive training. Absenteeism was rife. Ford thought he could stabilise his workforce by improving morale. He believed this could be accomplished through incentivising wholesome lifestyles.
Thus, Ford’s compensation plan was conditional, consisting of three major components:
First was the eight-hour workday, a major step forward.
Second was $5.00 per day. That was exorbitant at the time. Under Ford’s plan, all workers earned $2.34 per day. Another $2.66 per day was a conditional bonus, paid as profit-sharing if you abstained from booze, kept a clean home, regularly contributed to a savings account, did not take in boarders and were not physically abusive to your family.
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To carry this out, Ford established the Sociological Department and English School.
This was a committee that would visit the employees' homes to ensure that they were doing things the “American way”. They were supposed to avoid social ills such as gambling and drinking. They were to learn English, and many (primarily the recent immigrants) had to attend classes to become "Americanized". Women were not eligible for the bonus unless they were single and supporting the family. Also, men were not eligible if their wives worked outside the home.
Ford associate S. S. Marquis ran the Department, aka the Socialisation Organisation:
Nothing tends to lower a man’s efficiency more than wrong family relations. Henry Ford thought thrift was a very important quality because it indicated that a person had self-control, self-respect, responsibility, and would work steadily and diligently.
Third, Ford established a savings and loan for employees to encourage thrift and personal savings. This was the forerunner of many corporate retirement schemes.
Not only was Ford’s plan good for the corporate bottom line, but there was also a huge public relations benefit. Early first-time car buyers saw what Mr Ford did. They were going to buy their car from that guy.
And last but maybe not least, a blue-collar worker now had a shot at buying a Ford.
In the early 1900s, gambling, drinking, domestic abuse and other vices plagued the urban working class, which included large numbers of immigrants. These pervasive social ills inspired reformers such as Jane Addams (Hull House) and galvanised the temperance movement into a potent political force. Churches, social reformers and charities mounted high-profile campaigns against poverty, illiteracy and degeneracy.
Henry Ford stepped into the breach and tailored his groundbreaking compensation plan as a way to boost production while improving the lot of workers. Ford reasoned that workers with problems at home, especially financial troubles, would be distracted at the factory. Distraction was dangerous on a fast-moving, labour-intense assembly line. He wanted to provide the proverbial ‘hand up’ instead of a handout.
The Sociology Department was intended as a benevolent mechanism to help families. Yet it eventually proved impractical and was phased out after almost a decade. A for-profit corporation running a social welfare organisation, however well-intentioned, was not a good fit.
Nonetheless, Ida Tarbell, the prominent “muckraker” journalist, famous for exposing John D. Rockefeller’s skullduggery at Standard Oil, said of Ford’s initiative: “I don’t care what you call it, philanthropy, paternalism, autocracy. The results which are being obtained are worth all you can set against them.”
The American family owes a huge debt of gratitude to Henry Ford. The eight-hour workday and the living wage for industrial workers did much to improve family life. The company savings and loan served as the impetus for a panoply of corporate savings and retirement plans.
Ford proved to the world that investing in workers was good for business. Even uber-woke National Public Radio acknowledged, “The Middle Class Took Off 100 Years Ago... Thanks To Henry Ford?” UC Berkeley economist Harley Shaiken summed it up: "What that [Ford’s plan] gave us was an industrial middle class, and an economy that was driven by consumer demand."
That living wage economy with affordable consumer goods fostered a thriving middle class that defined American life until the advent of globalist winner-take-all economics in the late 20th century, which has wreaked havoc on the American family. We need another magnate like Henry Ford to advocate for the family. Elon Musk?
Suggestion: Woke media prattle about slavery, which ended here over 150 years ago. Any connection with slavery is justification to topple monuments and rename public spaces. It would be wonderful to see the same passion and exertion challenging today’s wage slavery instead of whining about 19th-century chattel slavery. At least that could lead to some benefit for the beleaguered American family.
*Ford, as principal shareholder, prioritised reinvesting profit into corporate expansion ahead of shareholder dividends. Ford knew the Dodge brothers were using those proceeds to finance starting their own competitor company. Naturally, it landed in court. In Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668 (Mich. 1919), the Michigan Supreme Court affirmed “shareholder primacy”, ruling that Ford should prioritise shareholder interests over employee benefits. However, the ruling also validated the “business judgment rule” that allowed Ford a huge measure of discretion in running his company.
Louis T. March has a background in government, business, and philanthropy. A former talk show host, author, and public speaker, he is a dedicated student of history and genealogy. Louis lives with his family in the beautiful Shenandoah Valley of Virginia.
Image: Henry Ford and schoolchildren at Greenfield Village. Ralph Henry Graves (1948), Wikimedia Commons.
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