Beth Tompkins Bates: The High Road to Economic Prosperity

In the 1920s, Henry Ford hired thousands of African American men for his open-shop system of auto manufacturing. In The Making of Black Detroit in the Age of Henry Ford, Beth Tompkins Bates explains how black Detroiters, newly arrived from the South, seized the economic opportunities offered by Ford in the hope of gaining greater economic security. As these workers came to realize that Ford’s anti-union “American Plan” did not allow them full access to the American Dream, their loyalty eroded, and they sought empowerment by pursuing a broad activist agenda. This, in turn, led them to play a pivotal role in the United Auto Workers’ challenge to Ford’s interests.

Today Beth Tompkins Bates writes a guest post about how Henry Ford’s strategies for increasing production at Ford Motor Company offer lessons for today’s sluggish economic recovery.

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In June, the U.S. Department of Commerce released figures showing that corporate profits are at an all-time high while wages as a percent of the economy are at an all-time low. Must we follow such a low road in order to remain profitable and competitive?

Since the financial tsumani of 2008, much discussion on the economy has cast the debate in terms of taking either the high road or the low road to economic recovery. Low wages, which define the low road, may not be ideal, as one group of economists argues, but they are necessary if corporations are to be competitive and profitable given the financial burdens imposed by regulations and high taxes. Recently Zeynep Ton, an MIT professor, presented a compelling counter argument in the Harvard Business Review. Ton found that although the average wages paid by Costco and Trader Joe’s were much higher than those paid by competitors, like Walmart, both were more profitable and achieved greater sales per employee than their competitors. While this study has caught the attention of the media—much like a man bites dog story—it could be argued that this alternative high-road approach is peculiar to retailing.

For that reason it is instructive to recall Henry Ford’s formula for success in industrial production early in the twentieth century. Ford Motor Company (FMC) dazzled the world with its innovative mass production system based on the idea of a moving assembly line designed so that work would move while workers stood still. It was hailed as a revolutionary approach for increasing the volume of auto production, which it did, but not to the satisfaction of Ford executives. Soon after the assembly line system was launched, management noted a major flaw in the process. Simply put, Ford’s workers—treated as just another factor of production—were not content. The idea of staying in place, “doing one job over and over again, and always in the same way,” as Henry Ford described it, led to extremely high turnover rates. 

In 1913, the quit-rate and absenteeism among assembly-line workers reached crisis proportions, prompting Ford to reevaluate the value of workers in the manufacturing process. That year, production goals called for approximately 13,600 workers, yet the company hired over 53,000 workers to replace what amounted to a labor turnover rate of 370 percent. On any given day, about ten percent of the entire workforce was absent. Not only did Ford’s profits suffer as the company had to train and retrain employees, but the work force also had no loyalty to the company.

To address the human element of production, Ford introduced his Five Dollar Day, Ford Profit-Sharing Plan. When the plan was unveiled in 1914, the world was stunned. Qualified Ford workers would receive five dollars a day, more than double the average wage in the auto industry at that time. When compared to lower prevailing wages in other industries such as steel, meatpacking, or coal mining, the Ford proposal was even more astounding. Simultaneously, FMC reduced the workday from nine hours to eight.

Although Ford workers had to adopt Ford’s work culture and living habits in order to qualify for the five dollars, Ford was praised by socialists like John Reed and ridiculed by fellow captains of industry. Newspapers around the world called Ford a man of exceptional goodwill as thousands of workers flocked to Detroit seeking jobs at FMC. Employees openly wore their company badges after hours in the community to identify themselves as part of the Ford family of workers.

While the issue of Ford’s compassion toward his workers may be highly contested, his Five Dollar Day plan exemplified Ford’s genius as a businessman. Employee turnover diminished. Worker productivity increased substantially, cutting the unit cost of production. High wages made it possible for “everyman” to purchase the basic, no-frills, black (and only black), Model T. The idea that high wages would lead to high car sales once workers could afford to buy what they produced revolutionized the philosophy of business by demonstrating the importance of raising take-home pay to increase consumption and fuel economic growth. Ford’s revolutionary pay policy helped shape a consumer-based economy, paving the way for the rise of the middle class.

Ford also opened the doors of FMC to African Americans. After World War I, Ford hired thousands of black men to work for Ford Motor Company, a decision that put African Americans on the high road to modernity so they, too, could take part in Ford’s “new world.” Entry into the new-age automotive industry represented a quantum leap forward for black workers who were routinely excluded from high-wage positions, considered to be “white men’s jobs.”

Early in the twentieth century, many of the “best” jobs for African Americans were in the service industry, illustrated by the fact that highly educated black men often had few opportunities in the broader economy apart from work as Pullman porters. Ford challenged the stereotype of the black man as servant when he put out the welcome mat for African Americans two decades before General Motors and Chrysler hired blacks for any but foundry or janitorial jobs. By opening the door to economic opportunity for black Americans on a wider, more inclusive scale than any industrial employer had before, Henry Ford turned into a mythic figure of immense proportions in black America and gained the loyalty of his workers for a time.

During the twenties, Ford not only hired large numbers of African Americans, but also placed many in skilled positions as crane operators, mechanics, electricians, bricklayers, and tool-and-die makers. The possibility of gaining access to jobs across the occupational spectrum at Ford on the heels of migrating North in search of greater opportunity marked more than an entrance into the industrial mainstream of the economy.

By rejecting the notion that better jobs were for white men only, Ford raised expectations and hope about what was possible, suggesting a corner had been turned in the ongoing struggle for inclusion of black Americans as full-blooded Americans. Ford’s policies sparked a transformation for black workers and their families, helped ignite the civil rights movement in Detroit, and provided a base for the formation of the urban, black middle class.

Ultimately, loyalty to Henry Ford eroded, and black Ford workers helped usher in the United Auto Workers in 1941. Nevertheless during the early years of FMC, Henry Ford understood how the high costs of low wages would cut into his long-term profits, just as he calculated the low cost of high wages when he considered the benefits of worker loyalty, especially in terms of reducing worker turnover and keeping unions out of FMC.

Beth Tompkins Bates is professor emerita at Wayne State University and author of The Making of Black Detroit in the Age of Henry Ford and Pullman Porters and the Rise of Protest Politics in Black America, 1925-1945.