The Five Dollar Day

The invention of the car is possibly one of the most influential inventions in the last hundred years. Henry Ford was the pioneer and the father of the personal car movement.  As well as inventing the car which had a dramatic impact on the ability of individuals to travel, Ford revolutionized the way that business is performed.  According to this article at the time he introduced the Five Dollar day, wages were around $2.50 a day.  With all the technology that had been invented earlier, Ford was curious as to why productivity hadn’t increased.  He discovered that it was due to low worker motivation. Since he knew individuals responded to incentives, and money is a great incentive, he essentially doubled salaries overnight. He figured that this would motivate his employees, and allow him to attract more skilled and reliable workers. And he was right. This essentially revolutionized the way that workers were paid in America.  Essentially Ford was initiating a profit sharing plan to motivate his employees and thank them for the good job that they had done.  This profit sharing program still remains to be one of the most successful ways to motivate employees to be more productive today. If you look at one of the most lucrative industries today, this fact becomes blatantly obvious. In law firms, profit is shared with those individuals who are directly responsible for bringing in company profits.  Partners and Associates bring in the largest pay, because they are the ones doing the work that brings the company profit. In other industries, this simply isn’t the case.  For example, last holiday season, I was employed by Sees Candies. I was paid by the hour, and was given no additional compensation for exceptional performance.  I have to admit that it was quite depressing when I could sell $20,000 worth of candy in 4 hours, and take home less than $50 in pay. Henry Ford probably realized this fact when he decided to double his workers salary.  Since they were the ones doing the work that directly brought profit to the company, it only made sense that he paid them more.

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3 thoughts on “The Five Dollar Day

  1. That is a great question. I know that in the business classes that I am taking, there is a huge emphasis on narrowing the income gap between individuals who manage the company, and those who actually do the work that brings in the profit.

  2. Pingback: 42 « Hakuna Matata

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