Journal of Labor Research

, 24:683 | Cite as

Did Henry Ford mean to pay efficiency wages?

  • Jason E. Taylor


In the past two decades economists have developed efficiency wage theories, which suggest a link between wage rates and worker productivity, while attempting to explain the existence of involuntary unemployment in equilibrium labor markets. Henry Ford's 1914 announcement of the five-dollar day, an overnight doubling of wage rates, is regularly used as the textbook application of efficiency wage theories put into practice. While previous research demonstrates that the effects of the five-dollar day were largely consistent with those predicted by efficiency wage theories, Ford's wage policy was principally motivated by the fallacious wage-aggregate demand link expressed by the so-called“high-wage doctrine”-a belief that many economists claim significantly contributed to the unemployment problem of the 1930s. In addition to exploring Ford's high-wage motives, I discuss the role Ford's wage statements and policies played in the acceptance and implementation of high-wage public policies during the Great Depression.


  1. Akerlof, George A.“Labor Contracts as Partial Gift Exchange.” Quarterly Journal of Economics 97 (Novem-ber 1982): 543–69.CrossRefGoogle Scholar
  2. — and Janet L. Yellen. Efficiency Wage Models of the Labor Market. Cambridge: Cambridge Uni-versity Press, 1986.Google Scholar
  3. Bruckberger, Raymond L. Image of America. New York: Viking Press, 1959.Google Scholar
  4. Carter, Thomas J.“Are Wages Too Low? Empirical Implications of Efficiency Wage Models.” Southern Eco-nomic Journal 65 (January 1999): 594–602.CrossRefGoogle Scholar
  5. Filene, Edward A.“The Minimum Wage and Efficiency.” American Economic Review 13 (December 1923): 411–15.Google Scholar
  6. Fisher, Irving. The Stock Market Crash-and After. New York: MacMillan Company, 1930.Google Scholar
  7. Ford, Henry. My Life and Work. Garden City, N.Y.: Doubleday, Page, 1922.Google Scholar
  8. —. Today and Tomorrow. Cambridge, Mass.: Productivity Press, 1926. (Reprint, 1988).Google Scholar
  9. —. Moving Forward. Garden City, N.Y.: Doubleday, Page, 1931.Google Scholar
  10. Foster, William T. and Waddill Catchings. Business Without a Buyer. Boston: Houghton Mifflin, 1928.Google Scholar
  11. Moulton, Harold G. Income and Economic Progress. Washington, D.C.: Brookings Institution, 1936.Google Scholar
  12. Nevins, Allan. Ford: The Times, the Man, the Company. New York: Charles Scribner's Sons, 1954.Google Scholar
  13. — and Frank E. Hill. Ford: Decline and Rebirth, 1932-1962. New York: Charles Scribner's Sons, 1963.Google Scholar
  14. Nye, David E. Henry Ford, Ignorant Idealist. London: Kennikat Press, 1979.Google Scholar
  15. O'Brien, Anthony Patrick.“A Behavioral Explanation for Nominal Wage Rigidity During the Great Depres-sion.” Quarterly Journal of Economics 104 (November 1989): 719–35.CrossRefGoogle Scholar
  16. Raff, Daniel M. G.“Wage Determination Theory and the Five-Dollar Day at Ford.” Journal of Economic History 48 (June 1988): 387–99.CrossRefGoogle Scholar
  17. — and Lawrence H. Summers.“Did Henry Ford Pay Efficiency Wages?” Journal of Labor Econom-ics 5 (October 1987): S57–86.CrossRefGoogle Scholar
  18. Rae, John B. The American Automobile. Chicago: University of Chicago Press, 1965.Google Scholar
  19. Sorensen, Charles E. My Forty Years with Ford. New York: Norton, 1956.Google Scholar
  20. Sward, Keith. The Legend of Henry Ford. New York: Rinehart, 1948.Google Scholar
  21. Taylor, Jason and George Selgin.“By Our Bootstraps: Origins and Effects of the High-Wage Doctrine and the Minimum Wage.” Journal of Labor Research 20 (Fall 1999): 447–62.CrossRefGoogle Scholar
  22. Vedder, Richard K. and Lowell E. Gallaway. Out of Work: Unemployment and Government in Twentieth Century America. New York: Holmes and Meier, 1993.Google Scholar
  23. Weiss, Andrew. Efficiency Wages: Models of Unemployment, Layoffs, and Wage Dispersion. Princeton: Princeton University Press, 1990.Google Scholar

Copyright information

© Springer 2003

Authors and Affiliations

  • Jason E. Taylor
    • 1
  1. 1.Central Michigan UniversityMount Pleasant

Personalised recommendations