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Wage Determination Theory and the Five-Dollar Day at Ford

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  • Raff, Daniel M.G.

Abstract

This paper examines the five-dollar day compensation policy instituted by the Ford Motor Company in 1914 in light of recent developments in wage-determination theory. The new wage was above the opportunity cost of the labor employed. Yet various efficiency wage theories, by which high wages increase output, are shown to provide an implausible explanation. The particular (and epochal) technical change that occurred at Ford and the attitudes and beliefs of relevant actors suggest instead a rent-sharing theory driven by the threat of collective action by labor. This confluence, not the money, marks the episode as a watershed.

Suggested Citation

  • Raff, Daniel M.G., 1988. "Wage Determination Theory and the Five-Dollar Day at Ford," The Journal of Economic History, Cambridge University Press, vol. 48(2), pages 387-399, June.
    • Handle: RePEc:cup:jechis:v:48:y:1988:i:02:p:387-399_00
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    Cited by:

    1. Claudia Goldin, 1994. "Labor Markets in the Twentieth Century," NBER Historical Working Papers 0058, National Bureau of Economic Research, Inc.
    2. Flynn, Sean, 2005. "Why only some industries unionize: insights from reciprocity theory," Journal of Institutional Economics, Cambridge University Press, vol. 1(1), pages 99-120, June.
    3. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," NBP Working Papers 113, Narodowy Bank Polski.
    4. MacLeod, W Bentley & Malcomson, James M, 1998. "Motivation and Markets," American Economic Review, American Economic Association, vol. 88(3), pages 388-411, June.
    5. Boyer, Robert & Freyssenet, Michel, 2002. "Entre innovations historiques et contraintes structurelles Eléments d'une théorie des modèles productifs," CEPREMAP Working Papers (Couverture Orange) 0205, CEPREMAP.
    6. Kuhn, Moritz & Luo, Jinfeng & Manovskii, Iourii & Qiu, Xincheng, 2023. "Coordinated firm-level work processes and macroeconomic resilience," Journal of Monetary Economics, Elsevier, vol. 137(C), pages 107-127.
    7. MacLeod, W. Bentley, 1992. "Les contrats auto-exécutoires et la théorie des institutions du marché du travail," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(3), pages 433-451, septembre.
    8. Charles W. Calomiris & Christopher Hanes, 1994. "Historical Macroeconomics and American Macroeconomic History," NBER Working Papers 4935, National Bureau of Economic Research, Inc.
    9. Robert Boyer & André Orléan, 1991. "Les transformations des conventions salariales entre théorie et histoire : d'Henry Ford au fordisme," Revue Économique, Programme National Persée, vol. 42(2), pages 233-272.
    10. Christopher Hanes, 2000. "Nominal Wage Rigidity and Industry Characteristics in the Downturns of 1893, 1929, and 1981," American Economic Review, American Economic Association, vol. 90(5), pages 1432-1446, December.
    11. Massimiliano Vatiero, 2023. "Extending Amartya Sen’s Paretian Liberal Paradox to a Firm’s Hierarchy," DEM Working Papers 2023/3, Department of Economics and Management.
    12. Boyer, Robert, 2001. "La "nouvelle économie" au futur antérieur : histoire, théories, géographie," CEPREMAP Working Papers (Couverture Orange) 0113, CEPREMAP.
    13. Flynn, Sean Masaki & Donnelly, Michael, 2012. "Does labor contract completeness drive unionization? Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 445-454.

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