Did Henry Ford Pay Efficiency Wages?

45 Pages Posted: 11 Apr 2004

See all articles by Daniel M. G. Raff

Daniel M. G. Raff

University of Pennsylvania - Management Department

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: December 1986

Abstract

This paper examines Henry Ford's introduction of the five-dollar day in 1914 in an effort to evaluate the relevance of efficiency wage theories of wage and employment determination. Our general conclusion is that the Ford experience is strongly supportive of the relevance of these theories. Ford's decision to dramatically increase wages is most plausibly portrayed as the consequence of labor problems of the kind stressed by efficiency wage theorists. The structure of the five dollar day program is consistent with the predictions of efficiency wage theories. There is vivid evidence that the five-dollar day resulted in substantial queues for Ford jobs. Finally, significant increases in productivity and profits at Ford accompanied the introduction of the five-dollar day.

Suggested Citation

Raff, Daniel M. G. and Summers, Lawrence H., Did Henry Ford Pay Efficiency Wages? (December 1986). NBER Working Paper No. w2101. Available at SSRN: https://ssrn.com/abstract=344867

Daniel M. G. Raff

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

Lawrence H. Summers (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States
617-495-1502 (Phone)
617-495-8550 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
96
rank
266,377
Abstract Views
1,909
PlumX Metrics