“Welfare Capitalism”

On this day in 1914, Henry Ford announces a revolutionary wage scale of $5 per day, and reduces shifts from nine to eight hours. Against a backdrop of widespread unemployment and increasing labor unrest, Ford’s bold move upped wages from a previous rate of $2.34 for nine hours (the policy was adopted for female workers in 1916).

The news shocked many in the industry–at the time, $5 per day was nearly double what the average auto worker made–but turned out to be a stroke of brilliance, immediately boosting productivity along the assembly line and building a sense of company loyalty and pride among Ford’s workers. He also offered profit sharing to employees who lived a “clean lifestyle.”

A Cleveland, Ohio, newspaper editorialized that the announcement “shot like a blinding rocket through the dark clouds of the present industrial depression.” The move proved extremely profitable; instead of constant turnover of employees, re-training and arduous culling of skilled labor, the best mechanics in Detroit flocked to Ford, bringing their human capital and expertise, raising productivity, and lowering training costs. In 1913 Ford had hired 52,000 men to maintain a core force of 14,000, as attrition on the line and in the job shops was so high.

Notwithstanding the popular myth that Ford wanted their workmen driving Fords, the true intent was soon quite plain; due to retention, training and productivity improvements, Ford’s “welfare capitalism” redounded to the company’s greatest benefit as profits doubled from $30 million to more than $60 million in less than two years.

And here, the story of strange, clever, crafty and creepy old Henry Ford endeth.

Author: Bill Urich

A tail-end baby-boomer, Bill Urich was born in Cleveland to a grade school teacher and her Navy vet husband, and reared in Greater Detroit. Working his way through school primarily at night, Mr. Urich holds a Bachelor’s in Journalism, Phi Beta Kappa, and a Juris Doctorate from Wayne State University. In his legal career he has acted as an assistant state prosecutor, city attorney, special prosecutor, mediator, magistrate, private practitioner and mayor of Royal Oak, a large home-rule city in Michigan. Mr. Urich continues in private practice and municipal prosecution, is on faculty to DePaul University, pens regular contributions to political publications, and remains active in selected campaigns and causes related to labor, social and criminal justice. A father of three mostly-grown sons, he spends his precious free time on family, friends, the pursuit of happiness, beauty and truth, three rescue cats, and fronting the rock band Calcutta Rugs from behind the drum kit.