The Ford Five Dollar Day

I. Background: Welfare Capitalism

The term “welfare capitalism” refers to a benevolent employer setting up programs and organizations (e.g. sports teams, recreational facilities, musical groups, insurance program, profit-sharing plan) for his workers. The main reason is to try and keep them happy and loyal to the company so that they won’t join unions. In the wake of reform sentiment during the Progressive Era, many employers realized that they had to make an effort to make things better for their workers, and welfare capitalism became pretty widespread among companies in the 1910s and 1920s.

II. Three Components of Ford’s New Program:

Ford had tried many of the programs listed above, but many of his workers were still dissatisfied, and Ford had to deal with costly problems of high turnover and absenteeism. Dissatisfied workers were less efficient, so in his quest for efficiency, Ford tried something new and, among fellow businessmen, controversial.

A. Eight hour work day

He lowered the work day to 8 hours.

B. $5 day

he offered his workers $5 a day (which was an exorbitant amount at the time) but they could only get the full $5 if they met certain conditions

1. regular wage (earned for working) - $2.34 was earned for working

2. profit sharing amount - and $2.66 more could be earned if Ford determined that the worker was living “right.” It was a conditional gift.

C. Set up Savings & Loans for Workers – (a S&L is basically a bank) He set up a special Ford bank to encourage the workers to save the extra $ they’re earning.

III. Ford’s Assumptions

Ford assumed that a sound home environment produced an efficient worker. If the worker were living in an “unsound” home environment, he would bring bad habits and attitudes to work. So Ford used the extra $ as a (strong) incentive for altering the habits and behaviors of his workers.

But there were other important reasons for paying his workers a higher wage. It would allow workers to also be consumers -- and if they saved their money correctly, hopefully they could buy a Ford automobile! Moreover, it hopefully would make workers less inclined to organize and join a union.

IV. The “Right” Way to Live

How did Ford determine if a worker was living right and should get the full $5? He set up the “sociological department” which sent investigators into all of the workers’ homes to observe how they were living and ask a lot of questions, particularly about alcohol use, marital relations, and spending habits.

The investigators were looking for evidence of the following: “thrift, cleanliness, sobriety, family values, and good morals in general.” The head of the sociological department, S.S. Marquis, said: “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. Good morals and proper family relations held a particularly middle class (or “bourgeois”) definition. This definition was often forced upon working-class and immigrant workers.

Ford’s Five Dollar Day program was set up in late 1914. In 1915 it cost Ford $18,000 to operate the sociological department, and he distributed nearly $8 million in profits to about 19,000 workers at Highland Park.

What if a worker didn’t cooperate with the sociological department or didn’t meet the standards? He would only receive the regular wage ($2.34), and he was given six months to comply with the department’s standards for living. If he did not meet the standards after six months, then he was fired.

V. Success?

The rate of turnover fell from 370% to 16% in 1915. (It went back up to 51% by 1918.) Absenteeism decreased dramatically too. Meanwhile, productivity went up, as did the number of Ford workers who had insurance, owned a home, had a savings account, and were married. Also, from what we can measure, drinking decreased.

Sounds pretty good. Should every company adopt this approach?

VI. Workers’ Responses

Most workers permitted the intrusions in their lives so they could get the extra $. Some would say that they traded their pride and privacy for money, but we must understand the economic insecurity of working class life. One historian argues that many workers resisted (in his words, “grumbled and griped”) - that they altered their behavior for Ford but didn’t truly internalize the values – that they didn’t let Ford truly capture their hearts and minds. Also, the $5 day program didn’t change the fact that the work, well, sucked. One worker reacted, “There is a limit to human endurance. Any man who is keyed up to the last notch [referring to the speed up] will eventually break down, it matters not whether they get $1 or $10 a day.”

Some criticized Ford as being a paternalist; in other words, that Ford was not just an employer but was also trying to be a father figure to his workers (rewarding and punishing his children.) They criticized him for trying to “own” his workers outside of the factory too and found the whole program humiliating. But Ida Tarbell, a Progressive journalist, commented: “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.”

VII. Legacy

The $5 day ended after just a few years because it cost Ford too much. It was an expensive program, and it became more expensive as the Ford workforce grew. Also, a decline in the labor supply in Detroit forced Ford to raise the basic wage rate, so he couldn’t afford to give such a high “profit-sharing” amount. And last, the automobile industry became much more competitive in the 1920s, so Ford had to look for ways to cut costs -- and he ended up cutting the sociological department.

He found a new way to control his labor force that was cheaper and more sinister. He began to rely on espionage (factory spies and informants) to report on workers who were doing objectionable things, and Ford was especially worried about workers trying to start a union. He hired thugs who would enforce order and loyalty.

Question: how committed was Henry Ford to his principles (helping his workers obtain thrift, sobriety, and so on) if he dropped the program when it got too expensive? Did he really care about the workers?

VIII. Relation to Progressivism

The Five Dollar Day captures Progressivism’s contradictory attitude toward unskilled workers (most of them immigrants), for it attempted to elevate them to a better life, yet it tried to manipulate or coerce them to match a preconceived ideal of that better life. Many lives were no doubt improved, but there wasn’t much room for diversity or acceptance of difference. Was it worth it?