[Vision2020] One hundred years ago today (January 5, 1914)

[Tom Hansen]

Courtesy of today's (January 5, 2014) Detroit Free Press at:

http://www.freep.com/article/20140105/BUSINESS06/301050040/1002/

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Henry Ford's $5 Day creates modern Detroit, causes shift in U.S. society

If there’s one day that created the modern 20th Century Detroit, it would be Jan. 5, 1914. On that day a century ago, Henry Ford shocked the nation by introducing the $5-a-day wage for Ford autoworkers.

That $5 Day roughly doubled what Ford and other industrialists had been paying their workers. Although it astonished and angered his peers, Ford calculated — correctly as it turned out — that paying so much would allow his workers to buy their own Ford cars, and reduce what had been a costly level of turnover in the company’s factories. It would create a loyal workforce that would boost productivity and profits to new heights.

The new wage rate set off seismic shifts in American society. A tidal influx of job candidates from the South and around the world flowed into Detroit. Factory jobs became prized, helping turn America into the world’s industrial colossus. Detroit and America were never the same.

“The inauguration of the $5 Day was truly one of the defining moments not only for industry but for the entire economy in the 20th Century,” said Harley Shaiken, a professor and labor expert at the University of California Berkeley.

But a century later, Ford’s bold decision seems almost quaint in a time of rising wage inequality and constant downward pressure on Americans’ earnings. Shaiken said the anniversary of the $5 Day should escalate the debate on today’s low-wage workforce.

“This isn’t a history lesson. This is a discussion about today and our future,” he said.

Why Ford acted

Historians agree that generosity was hardly Ford’s only or even main motive in increasing wages so dramatically. Rather, he was troubled by high rates of absenteeism and turnover at his plant in Highland Park. Daily absenteeism ran at 10% of the workforce and turnover required the company to constantly replenish its workforce with new hires.

The $5 Day changed all that. Daily absenteeism dropped from 10% to under 1%. Replacement hiring dropped from 53,000 in 1913 to just 2,000 by 1915, even though Ford’s workforce had grown substantially by then. And production in many departments soared by 50% or more. Henry Ford himself later called the $5 Day “the greatest cost-cutting move I ever made.”

Ford suddenly had all the potential workers he could handle. The day after the Jan. 5 announcement, an estimated 10,000 job seekers stood outside the Ford plant despite the frigid temperatures. On Jan. 12, the day the pay increase took effect, the number of daily job seekers grew to an estimated 12,000 despite temperatures near zero. Some in the crowd became unruly when it was clear not all could possibly get an interview at once, and some cars were overturned and the local Fire Department turned hoses on the crowd.

Historians credit the $5 Day with promoting the migration of black Americans from the South to the industrialized cities of the North and Midwest, one of the most important demographic movements in U.S. history. Other job seekers came from all over the world.

Rival industrialists might complain that Ford was crazy, but eventually they had to also raise their wage rates, if not as quickly or as dramatically.

“Up to that bold moment in January,” wrote historian Douglas Brinkley in his book “Wheels for the World,” “no business had ever nodded to the importance of the labor in such a dramatic and costly way. The $5 Day marked, if any one date could, the end of the Gilded Age.”

And the move solidified Henry Ford’s spot in the pantheon of American folk heroes. As Brinkley wrote, “In the flash of the unveiling of the $5 Day, he became one of the most famous men in the world, better known than his car, even.”

If Henry Ford was gambling that a higher wage would boost his productivity and profits, the biggest winners were the American people.

“The most important model that came out of the Highland Park plant was not the Model T. It was the middle class,” Shaiken said.

Rise & fall of unions

The benefit to workers of Ford’s $5 Day dwindled in years to come. In the Depression years of the 1930s, workers once again complained bitterly about low pay and unpleasant working conditions in Ford’s factories. Walter Reuther and his brothers and other leaders of the nascent United Auto Workers union battled Ford’s security squads ferociously for years before finally winning a contract from Ford Motor, ironically as the last of the major automakers to sign a UAW contract.

It was those union contracts of the 1940s and afterward as much as the $5 Day that created a true middle class in America. High wages and benefits like retirement pay, paid vacation, health care, and other improvements that unions won in their contracts made cities like Detroit a haven for blue-collar workers for decades.

But in recent years those gains have gradually slipped away as business owners gained the upper hand in their battle with unions. The rise of conservative political forces since President Ronald Reagan’s election in 1980 led to a judiciary less willing to rule in workers’ favor in labor disputes. The percentage of American workers who belong to unions has dropped steadily as industry moved from the Rust Belt to the U.S. South, to Mexico, and offshore.

The UAW and other industrial unions also faced other challenges, including overseas competition from non-union competitors that ate away at the market share of domestic producers, forcing deep cuts to workforces and losses in union ranks. The UAW has been unable to make inroads in their recruiting drives at these foreign companies that set up operations in the U.S., though it is close to representing workers at a Volkswagen plant in Tennessee.

One statistic captures the glum prospect for workers today: Adjusted for inflation, American males earn about the same amount today as they earned in the 1970s, a stagnation that imperils the dream that each generation can live a little better than the one before.

Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass., said that Ford’s enlightened wage boost finds few parallels today when retail giants like Walmart and McDonald’s build a business model on low prices for consumers subsidized in part by low wages for workers.

“It’s very rare to find that nowadays because of the extreme cost pressure. If anything wages are negotiated backwards and downward in terms of cuts and freezes,” he said.

One glaring exception — the huge salaries paid to CEOs and other top executives at major corporations. The Economic Policy Institute, a Washington, D.C., think tank that studies labor issues, reported in 2013 that CEOs of the nation’s 350 largest corporations earned an average of $14.1 million in 2012. That was about 270 times greater than the average worker salary, a ratio that has risen dramatically in recent decades. In the 1960s, CEOs made roughly 20 times what their workers made.

A new normal

One difference in American society today might soften the contrast between 1914 and today. In Henry Ford’s day, said Charles Ballard, a professor of economics at Michigan State University, the U.S. social safety net did not exist yet. Social Security, Medicare and Medicaid, and other safety net programs created decades after 1914 provide solace today that Ford’s 1914 workers couldn’t count on.

But downward pressure on wages and the weakening of labor unions are among the trends that have been reversing decades of progress in the mid-20th Century for American workers, Shaiken, Ballard and Chaison all agreed.

As if to emphasize that reality, the U.S. Bureau of Labor Statistics in December released its projections for the number of jobs needed in various fields over the next 10 years. Health care will provide the greatest growth opportunities but many of those jobs will be in relatively low-wage positions such as health care support, jobs that are often held by women.

Joan Entmacher, vice president at the National Women’s Law Center, described the projections as a glimpse into our future. “And it isn’t pretty,” Entmacher said. “It shows that the recent concentration of job gains in low-wage occupations, especially for women, isn’t just a result of the recession — it’s becoming the new normal.”

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The day after the Jan. 5, 1914, announcement of the $5-a-day wage, an estimated 10,000 job seekers stood outside the Ford plant in Highland Park despite the frigid temperatures.



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Seeya 'round town, Moscow, because . . .

"Moscow Cares" (the most fun you can have with your pants on)
http://www.MoscowCares.com
  
Tom Hansen
Moscow, Idaho

"There's room at the top they are telling you still.
But first you must learn to smile as you kill,
If you want to be like the folks on the hill."

- John Lennon
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