Ford's pay boost drove automakers' standard for century

http://www.nbcnews.com/business/fords-pay-boost-drove-automakers-standard-century-2D11862569

Paul A. Eisenstein The Detroit Bureau
Jan. 6, 2014

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But perhaps no single moment was more pivotal than one day 100 years ago when car maker Henry Ford announced he would double the pay for 25,000 of his employees.

Not only did Ford boost wages to $5 a day but he cut the time his employees spent toiling on the grueling assembly line from nine to eight hours.

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Clearly, that didn’t happen and, if anything, it helped lower Ford’s costs by reducing the chaos on the assembly line where workers frequently had lasted little longer than it took them to be trained for the job.

Equally important, Ford’s $5 wages – about $117 a day in today's money, or nearly $30,000 a year – helped kick-start the American middle class, creating a ready market for the cars those workers were building, especially when other major manufacturers were forced to follow suit.

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While not all of his employees qualified for the $5 wage, all received major increases and the payoff was obvious almost immediately. Previously, the Model T plant saw as much as 10 percent of its workforce quit – daily. That quickly dropped to just 1 percent. By 1915, even though production was rising sharply, Ford needed to hire just 2,000 replacement workers. In 1913, the year the moving assembly line was switched on, the factory had needed 53,000.

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And while Ford had once been a hero to his workers he would eventually be demonized for the harsh conditions along the line. The automaker aggressively resisted union organizing efforts, giving in only after media coverage of the violent Battle of the Overpass, when company goons beat up labor activists outside one of the Ford plants in May 1937.

Over the decades, wages at Ford and its Detroit rivals would rise rapidly – until the U.S. economy began to falter in 2007. That saw the United Auto Workers Union agree to trim total labor costs at Ford from around $70 an hour to just over $50. And many newly hired workers now fall into a lower, or second-tier pay structure worth little more than half that amount.

That means they’re earning less today, adjusted for inflation, than Ford workers were given after the pay hike of January 1914.