The Five-Dollar Day, Reread

Abstract

On 5 January 1914, the Ford Motor Company announced that it would pay the men at its Highland Park plant in Michigan five dollars for an eight-hour day. The rate it replaced was two dollars and thirty-four cents for a nine-hour day. Within days, thousands of men were waiting at the plant gates in the cold, far more than there were jobs. The company had set out to solve a labour problem and had, for a few weeks, created a crowd. Seventy-three years later, two economists, Daniel Raff and Lawrence Summers, went back to the company's records and the contemporary accounts to ask what the five-dollar day had actually been. Their question was Akerlof's: was this a firm paying more than the market required in order to get something the market could not deliver? Their answer was yes. Ford had been losing workers almost as fast as it could hire them, and the work on the new moving assembly line was gruelling and easy to do badly.