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Henry Ford and the Moving Assembly Line
In 1913, Henry Ford had produced a little over 170,000 Model T automobiles.1 Then, on December 1, 1913, Henry Ford's moving assembly line began operations in order to increase the efficiency at Ford's Highland Park plant. The idea of using the moving assembly line for manufacturing was unique, however, Ford borrowed the idea from the Chicago meat packing industry. When the assembly line began, it was organized into 84 stations with a worker at each station.2
In January 1914, just a month after the assembly line began, Henry Ford more than doubled the wage he was paying his workers to $5 per day for a 5-day work week. Henry Ford's pay raise came in the form of what he called "profit-sharing."3 Adjusted for inflation, this was a good living wage. For context $5 then was worth $150 to $160 today.
When the moving assembly line was created it reduced the time it took to assemble a Model T chassis from 12 hours to 1.5 hours.4 But it created new challenges in the work environment causing work to be very repetitive and taxing and when workers were only making $2.34 cents before the assembly line, worker turnover was high. When Ford asked his managers to increase the workers pay, they agreed to increase pay by 25 cents per hour, which Ford told his managers was not enough. Ford demanded his managers agree to $5/hour and 8-hour work days rather than 9-hour work days. This is a great example of what can happen when workers become more productive thanks to technology. More on this in the section at the end of the article.
The Ford-Dodge Drama
On December 30, 1918, Henry Ford stepped down as the president of Ford Motor Company and his son, Edsel Ford stepped into the role. The Dodge Brothers had sued Ford for mismanaging the company and withholding dividends as they held significant shares in the company. The Dodge brothers had acquired shares of the company when Ford had them contract manufacture parts beginning in 1903. At the time, Ford couldn't pay them their full wages and so he agreed to pay them in part with shares in the company.
After resigning as president in 1918, Henry went on to threaten to sell all his shares in the company and start a new company. In response, the Dodge Brothers knew they didn't want to face Henry Ford as a competitor and they had their hands full managing their own car company that they started in 1913. Therefore, they sold all of their shares to Ford and by July 1919, only Henry Ford and his family members owned shares in the company.
In 1920, Ford reorganized the company as a Delaware chartered company and the company had a record-breaking year, producing over 900,000 vehicles.5
Tragically, the Dodge brothers both passed away in 1920 when they contracted the flu and pneumonia while attending an auto expo in New York City. John Dodge died in January 1920 and Horace Dodge died months later in December 1920.
Are Workers Receiving the Fruit of their Labor (Productivity Gains) Today?
Can you imagine getting a 100 percent raise overnight from your employer? Ask anyone working today and they are happy to squeak out a 2 percent raise and anything above that is considered special. And in a world that is rightly ordered, a 2 percent raise would be laughed at. Rather, raises would reward workers for the productivity gains that they created while at the same time, increasing their employer's profitability. However, since 1913, there has been something that steals any productivity gains from the workers who create them. Today, workers are not rewarded for becoming more productive...rather, they are continually stressed to find new ways to do greater and greater amounts of work without being proportionately rewarded. Why is it happening this way? I would argue it is happening this way thanks to the Federal Reserve central bank doubling the money supply in 2009 and again in 2020-21. The Federal Reserve, thanks to its money printing, causes inflation to increase and as a result, any productivity gains that workers create, mostly goes to the state in form of a hidden inflation tax. I realize it may be difficult for some to conceptualize this in your head and be able connect these two concepts: increasing productivity vs increasing wages . That's why there is a beautiful chart, just below, that provides a visual understanding for us.
In this chart, one line represents worker productivity and the other represents hourly wages. Historically, these two lines remained in lockstep, however notice the date that the two lines began to diverge. The divergence between worker's productivity and their wages began to happen immediately after 1971. Ask yourself, "What happened in 1971?" Most already know, but this was the year that fiat(paper) money became unpegged from gold. Today, governments can print as much money as they want with nothing backing it. This causes inflation which will eat up any productivity gains you create in your work...leaving the workers to work harder while earning less when adjusted for inflation.
Although the dollar didn't become unpegged from gold until 1971, the institution that made this possible, the Federal Reserve, was created in the same year as Henry Ford's moving assembly line: 1913.
Source: FRED St. Louis Federal Reserve
Sources:
“Henry Ford and Edsel Ford with Ford Motor Company Executives, Henry Ford’s Office at the Highland Park Plant, circa 1913 - The Henry Ford,” 8/25/2023. https://www.thehenryford.org/collections-and-research/digital-collections/artifact/114263.
“A Science Odyssey: People and Discoveries: Ford Installs First Moving Assembly Line,” 8/25/2023. https://www.pbs.org/wgbh/aso/databank/entries/dt13as.html#.
Gilchrist, Robert Niven. The Payment of Wages and Profit-sharing: With a Chapter on Indian Conditions. India: University of Calcutta, 1924. 200.
Ford Website. “Company Timeline,” 8/25/2023. https://corporate.ford.com/about/history/company-timeline.html#.
“Ford Production,” 8/25/2023. https://www.mtfca.com/encyclo/fdprod.htm.