Slavery aside, according to Henry Ford,
So this was Ford’s theory: Companies had an interest in ensuring that their employees could afford the products they produced. Put another way, employers had a role to play in boosting consumption. While paying higher wages than you absolutely needed to might lower profits temporarily, it would lead to a more sustainable business and economy over time. If the motorcar was going to be a mass-produced product for typical Americans, not a plaything for the rich, Ford would strive to pay his workers enough so they could afford the products they worked on all day.
Henry Ford Understood That Raising Wages Would Bring Him More Profit
It doesn't make sense that Ford was giving employees more money so that
they could buy his cars. Certainly, if they did then Ford would recoup some
of the wages, but those wages exceeded the profit per car. So it must've
made sense for other reasons.
From the link....
Of course, Ford was motivated more by self-interest than by altruism. Turnover was huge in the growing auto industry, as workers hopped from factory to factory in search of better wages. The nation was in the midst of a rising wave of labor activism that frequently turned to violence. International networks of communists, socialists, and various other types of radical syndicalists were organized and active in America’s largest cities—and occasionally tossed bombs at business owners. Raising wages proactively was clearly a way to buy some short-term labor peace.
But Ford was playing a deeper, longer game. The Ford Motor Company was in the business of building an expensive durable good. The first cars he had built in number, the 1903 Model N, cost about $3,000, and so were accessible only to that era’s one percent. Henry Ford recognized that the automobile would be more successful as a volume business than as a niche product. “I would build a motorcar for the great multitudes,” he proclaimed. Through relentless innovation, vertical integration, and the obsessive development of an assembly line, Ford had already managed to bring the cost of the Model T, the first democratic car, down to about $500. And the company was moving about 250,000 cars a year.
The auto environment back then was extremely competitive, with dozens of
car companies in Detroit alone. Workers were hard to retain, & some even
took Ford technology to start their own companies. This is why his Model T
development laboratory was a high security secret in the Piquette Ave facility.
(It was recreated a year ago, & is now open to the public. I supplied
the machine tools for it. And yes....I'm pleased as punch about that.)
Other factors....
- The assembly line work environment was also increasingly brutal
because of the repetitive tasks. I speculate that he used higher
pay as motivation to stay & endure that.
- Employee overhead (eg, payroll taxes, benefits) was less then.
Doubling the pay was less costly than would be doubling pay today.
