The Centennial of Henry Ford’s Five-dollar Day

One hundred years ago on Sunday, back on January 5th of 1914,
Henry Ford strung the industrial world up by its ankles and shook it, winning
the instant animosity of his peers and securing the fortunes of the Ford Motor
Company. More than doubling the hourly rate of his line-workers, he established
a $5 day that was unprecedented in the industry and amounted (in today’s
equivalent) to about $120. Ford was not a generous man, not given to altruism.
He was trying to solve the problem of workforce turnover and he did, garnering astonishing praise in
newspapers across the country in the bargain. An editorial in The Cleveland
Plain Dealer said Ford’s announcement “shot
like a blinding rocket through the dark clouds of the present industrial
Ford’s is a Centennial we ought not to
let slip by. It’s pertinent to the current hand-wringing in government and on
the street over America’s shrinking middle class and growing unemployed and
under-employed population. Interestingly,

had there been such a thing as a
minimum wage in Henry’s day, you can depend upon his resolute fight to the
death upon its increase to five dollars. He wanted nothing from government but
to be left the hell alone to develop his Model T. Ford’ spectacular wage
increase was designed to be first out of the gate, garnering the best employees
in Detroit.
He got them by the truckload and of course, his competition
was forced to follow, but Henry quickly got the cream of the crop and, perhaps
more importantly, a reputation as a leader among a then leaderless class of
workers. Ford was the employer of choice for decades to follow and Detroit
became the wealthiest city in America until it all came unraveled, seventy
years later. Ford himself remains #9 in the list of all-time world’s wealthiest
men. It seems sharing the wealth does
bring greater wealth, when it’s done for purpose and profit. That’s a strong
argument against a federally mandated minimum wage. 
Mitt Romney was both wrong and right
in the same moment with his ‘forty-seven percent,’ only because America had broken
the rungs of its historic ladder to the middle class, relegating it to the nation’s
garage. According to some, that abandoned ladder costs taxpayers close to $1
trillion a year in welfare costs, while a third of the population is at or near
poverty levels and continues to sink.
The Ford era recession of 1913-14 saw business activity drop by
26%, trade 11% and unemployment then stood at 12%. Today we’re in the midst of a
similar, but modern job recession—not industrial (although it’s there as well),
but primarily in the services industries, where wages are stalled and two jobs
the norm for survival. If they’re not already there, a third of Americans today
are a single job loss or health emergency away from financial collapse. Perhaps
not in your neighborhood or mine, but still one in three and no relief in
sight. The social cost is as bitter as the circumstances of that ever-growing
underclass. Well, maybe not quite—it’s
one thing to grouse among your affluent buddies and quite another to depend on
food stamps (46 million Americans)—but you get my drift.
Services, a major sector of the low-wage industries, are affected
by excessive turnover and training costs as well, and the unintended
consequences of Ford’s Five-dollar Day are worth revisiting in a modern context.
But modern context would need a powerful force, as was Ford in his day–a
company with market-share sufficient to pull it off and make it stick. 
For the sake of this premise, I
nominate Wal-Mart, the largest private employer and retailer in the world, with
over two million employees. As with Ford, 50% of the company is owned by the
Walton family, dropping the sole power to act on their shoulders. Sam Walton
might have done it long ago. Son Samuel Robson Walton is Chairman of the Board and,
looked at from this perspective, the Walton family could initiate a solution
that boosts the economy, brings the walking-wounded back into the consumer
economy, trends toward stay-at-home moms for families with children and reduces
the welfare burden that increasingly leads us toward class war. 
We’re too good for that, too compassionate and innovative a
nation to settle for a social death-spiral in an America that was built by and
prospered on opportunity. But it must be profitable
for Wal-Mart. That’s the deal, the premise of the premise. Let’s try it on for
size, see if we can attach some meaningful numbers to it.
A recent study by wiser men than me claims if Wal-Mart were
to raise their lowest wage-rate to $12, it would cost their average customer an additional 47 cents every time they
came to the store, while maintaining
profits at current levels
. But let’s take the increase to $20, a little
less than twice Wal-Mart’s average ‘associate’ wage and comparable to Henry’s
experiment. Most probably that would raise customer cost to an extra dollar from
their pocket in increased prices with each visit. It would likely shave a half
percent off Wal-Mart’s profit, reducing 2012 earnings from $15.7 billion to an
even $15 billion in what the company already calls a ‘down year.’ 
I don’t doubt we could all live with that, but I want
Wal-Mart and all other American retailers to have ‘up years’—a whole string of
them. We agreed it must be profitable, so let’s claw back that $700 million and
more, way more: 
Expect Wal-Mart to benefit from a
significant increase in sales. Ford
sold more cars to workers who could afford to buy them and, with spendable
income in their pockets, one in three Americans would be better able and more willing
to shop Wal-Mart. A 33% increase in customer-base is hard to ignore, when
retailers today fight over single-digit percentages. The rest of the retail industry
would be forced to follow, just as with Ford, but Wal-Mart would have both the
jump and the reputation. Jump is profitable, reputation is priceless.
Consider that $700 million clawed back many times over just
by the increase, but the profits increase from there. An absolutely uncontested
gain accrues from a sharp decline in worker turnover and training costs. Wal-Mart
might further expect welcoming rather than picketing crowds gathered at new locations,
as well as pro-growth zoning board decisions. Then there’s the huge increase in
employee loyalty to be considered, that worked so well for Ford. Well paid workers
stay with their employer and praise the company as a great place to work. You don’t
find them on picket lines or thirsting for union representation. Finally, Wal-Mart
would no longer be the #1 company America loves to hate, solving an image
problem that haunts the largest retailer on the planet.
A win-win for Wal-Mart leadership and
profits, as well as those of similar retailers, is motive enough to increase
the buying power of 67 million Americans and their additional tens of millions of dependents. A sustainable leg-up to
promising futures is too mutually beneficial for low-wage industries to ignore.
The ladder to a solid middle class would be hauled back out of the garage, dusted
off, repaired, re-painted and made sturdy.
As for welfare, there will always be Americans, who cannot
help themselves; the mentally ill or those unable to sustain their lives for
reasons of disability, injury or unavoidable circumstance. With our enormous and
growing welfare burden reduced by half or more, we’ll be better able to assist
So that’s the conversation I hope America will begin to have
with itself on this Centennial of Ford’s Five-dollar Day. I believe far more in
business than government to solve social-economic problems and Wal-Mart can lead
us there again, if the Walton family cares to and dares to. While an America without Wal-Mart
is plausible, a Wal-Mart without America is escapist fiction. 
Even Henry Ford might have smiled at the metaphor and Henry
was a famously taciturn man.

1 thought on “The Centennial of Henry Ford’s Five-dollar Day

  1. Costco get's it, one of the best company to work for in America, average Costco employee gets $45,000 a year. The Walton family only cares about there stock price, that's why the family keeps buying more stock, they only care about keeping employee cost low, to look out for them self. Roth

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