Did Henry Ford Pay Efficiency Wages?

Daniel M G Raff and Lawrence Summers

Journal of Labor Economics, 1987, vol. 5, issue 4, S57-86

Abstract: The authors examine Henry Ford's introduction of the five-dollar day in 1914 in an effort to evaluate the relevance of efficiency-wag e theories of wage and employment determination. They conclude that t he Ford experience strongly supports the relevance of these theories. Ford's decision to increase wages dramatically is most plausibly the consequence of labor problems of the kind efficiency-wage theorists stress. The structure of the five-dollar day program is consistent wi th the predictions of efficiency-wage theories. There is vivid eviden ce that the introduction of the five-dollar day resulted in substanti al queues for Ford jobs. Significant increases in Ford productivity a nd profits accompanied the new regime. Copyright 1987 by University of Chicago Press.

Date: 1987
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