Henry Ford didn't pay $5 a day just to be nice
Sooner or later, when the debate over wages for unskilled workers is raging, Henry Ford's name gets dropped. To many who support paying fast-food workers and Wal-Mart employees more than they make, and more than their labor commands, the carmaker is nearly a patron saint.
In 1914, Ford began paying his unskilled workers $5 a day, about twice the norm, and said he paid them so much so they'd have enough to buy his Model T. The move infuriated other factory owners and led to huge headlines and hiring lines. It also created a legend that still lends credence to the idea that paying higher wages than the market demands increases the size of the middle class, the buying power of laborers and the prosperity of the companies that pay those inflated wages.
The only trouble is, that legend isn't true.
Ford did pay those wages, but about half of the money was profit sharing, and the employees had to prove they were living upstanding and moral lives to get that extra pay.
According to Stephen Meyer, a labor historian and professor emeritus at the University of Wisconsin-Milwaukee, Ford didn't pay so much because of beliefs about enriching workers. He had no choice.
According to Meyer, in 1913, the year before Ford doubled wages, the turnover rate at his plants was 370 percent. In contrast, Wal-Mart's turnover rate today is said to be 100 percent annually, still a very high number by today's standards.
“They wouldn't stay,” Meyer said in a phone interview. “They hated the work and they would just walk off the job or not show up.” That meant that to maintain a workforce of 13,000 to 14,000 employees, the company had to hire 52,000 workers in a year.
Almost as crippling, absenteeism on Ford's production lines ran about 10 percent, and on the assembly lines the company had pioneered, absenteeism was intolerable, according to Meyer.
Ford, along with his production lines, pioneered the boredom of modern menial labor. Boiling down the full-time job of a craftsman and his varied chores to one repetitive task drove the workers batty, and so $2.50 per day wasn't enough to keep them.
“This was particularly true because car buying, and thus car production, was very seasonal back then,” Meyer said. “People bought cars mostly in the spring. So there were a lot of layoffs, and then rehiring. Ford had to pay $5 a day because they knew they wouldn't make that $5 every day.”
The pay rate, like all pay rates, was a business strategy.
There are major retailers, like Costco, that pay more than Wal-Mart and have better benefits. That they do so is part of their strategies, I think, designed to lessen turnover and thus expensive training, attract better employees and perhaps maintain a happy staff that will pass that joy on to customers.
There are many restaurants that pay employees far more than fast-food franchises. They need better cooks and more skilled customer service employees than McDonald's does and must pursue different hiring and wage strategies.
Companies pay what they must. When you hear that a large employer, whether it be Henry Ford or Costco, pays more than necessary, it generally doesn't mean that company is good-hearted. It means that company is good at public relations.
Lane Filler is a member of the Newsday editorial board.