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How Doubling Wages Was The Best Cost-Cutting Measure Ever For Ford

On January 5, 1914, the wages of Ford workers received a considerable raise. An industry-wide seismic change in labour began when Ford Motor Company declared a $5 per day minimum pay for an eight-hour shift (replacing $2.34 for a nine-hour day).

American factories changed their workforces incredibly quickly in 1913. In one year, investigators at Highland Park counted more than 200 severed fingers and 75,000 burns, cuts, and puncture wounds, making it worse for Ford owing to the monotony and brutality of the assembly line.

Henry Ford and other company executives were concerned about high absenteeism and turnover rates at the Highland Park plant in the beginning of 1914. Because of the 380 percent turnover rate and the 10% daily absence rate, the company was forced to regularly add new employees.

The $5 day was “the best cost-cutting measure ever undertaken,” Ford is thought to have said. He only hired 6,508 people in 1915, primarily to fill new jobs. The time it took to construct a Model T decreased from 12 hours and 28 minutes to 93 minutes over the course of two years. Costs decreased. The markets grew.

The morning after the announcement, at sunrise, there were perhaps 10,000 guys milling about outside Highland Park in the arctic conditions and swirling snow. To fill the slots of the extra shift, they arrived. Signs declared the end of hiring on Saturday, January 10.

The two existing nine-hour shifts were swapped out for a continuous rotation of eight-hour hours to accomplish the new $5 Day for an eight-hour shift. Ford Motor Company increased productivity while having employees work less hours. Everybody benefited from this.

A. S. Blakely reported in the January 11 Indianapolis Star “the recent announcement of the Ford Motor Company that it would distribute $10,000,000 profits among its employees in semi-monthly dividends and make a minimum wage scale of $5 a day, has been given the subject of general interest in Indianapolis during the past week.

The $5 Day altered turnover and absenteeism. Daily absenteeism in Highland Park fell to less than 1%, and replacement hiring fell from 53,000 in 1913 to only 2,000 in 1915.

Ford was inspired to construct a number of branch assembly factories across the nation by these excellent production conditions. Later in the fall of 1914, work on the Ford branch assembly factory (also known as Plant 215) in Indianapolis at East Washington Street and Oriental started. In the spring of 1915, the Indianapolis facility started producing. This facility was able to assemble 300 vehicles every day by the mid-20s.

Indianapolis workers were impacted by Henry Ford’s proposal of a $5 per day minimum wage. This conduct undoubtedly had an impact on the common person’s desire to buy a car.

Combined with assembly line production and higher wages, the price of a Model T went from $850 in 1908 (equivalent to about 18 months salary for an average wage) to less than $300 in 1925 (equivalent to about 4 months salary for an average wage).

Sources:

  1. Wikipedia: History of Ford
  2. Britannica: Ford
  3. Wsws.org
  4. Autogiftgarage

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