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The Middle Class Took Off 100 Years Ago ... Thanks To Henry Ford?

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The Middle Class Took Off 100 Years Ago ... Thanks To Henry Ford?

Economy

The Middle Class Took Off 100 Years Ago ... Thanks To Henry Ford?

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AUDIE CORNISH, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel. Let's go back now 100 years to a key moment in the long debate over the importance of a living wage. It was January 1914, a frigid month in Detroit, much like January 2014, still thousands lined up in the bitter cold outside a factory in Highland Park, Michigan. They were there to take Henry Ford up on an extraordinary offer: $5 a day for 8 hours of work.

As Michigan radio's Sara Cwiek reports, for U.S. workers, it was one of the defining moments of the 20th century.

SARA CWIEK, BYLINE: I'm standing here in front of what's now an abandoned factory complex along busy Woodward Avenue. It's hard to imagine now those big crowds lining up in the frigid cold eager for the chance to work in a bustling factory for $5 a day. That was more than double the average factory wage at that time. There's not much to distinguish this place from Detroit's other industrial ruins. But if you take the time to stop and walk up to the front of the building here, you'll find a pretty modest historical marker proclaiming this the home of the Model T. It tells us that by 1925, this place churned out more than 9,000 Ford Model T's a day. And it ends with this: Mass production soon moved from here to all phases of American industry, and set a pattern of abundance for 20th century living.

But Henry Ford was a hardnosed business man. He didn't introduce the $5 workday because he was a nice guy.

BOB KRIEPKE: It was mainly to stabilize the workforce. And it sure did and raised the bar all over the world.

CWIEK: That's Bob Kreipke, corporate historian for the Ford Motor Company.

UNIDENTIFIED MAN: By 1913, Henry Ford broke the 200,000 mark in Model T production, the first moving assembly line made this possible. Conveyor belts transported small parts to the worker. They performed a specific task.

CWIEK: This tremendously sped up production, but Ford still had a problem. While he had standardized production, he hadn't standardized his workforce. Now he didn't need particularly skilled workers; he just needed ones that would do the same repetitive, specialized tasks hour after hour, day after day.

Kreipke says there was chronic absenteeism and lots of worker turnover. So Ford gambled that higher wages would attract better, more reliable workers.

KRIEPKE: It was an absolute, total success. In fact, it was better than anybody had even thought.

CWIEK: The benefits were almost immediate. Productivity surged, and the Ford Motor Co. doubled its profits in less than two years. Ford ended up calling it the best cost-cutting move he ever made. Now, it's widely believed that Henry Ford also upped wages to expand his market, paying employees enough to buy the cars they made. While that wasn't Ford's main motivation, it was a welcome byproduct, and University of California-Berkeley labor economist Harley Shaiken says it was a game changer.

HARLEY SHAIKEN: What that gave us was an industrial middle class, and an economy that was driven by consumer demand.

CWIEK: Shaiken says Ford proved that higher wages lead to more productivity, which in turn was good for business. That positive feedback loop gave rise to a broad prosperous middle class. But over the years, waves of economic pressures and political changes have broken that link.

SHAIKEN: Today, overwhelmingly employers view the lowest wage as the most competitive wage.

CWIEK: These days, global supply chains feed a hyper competitive auto industry where no one wants to give up even an inch of ground. And keeping up with technology takes precedence over stabilizing the workforce. Harley Shaiken agrees that this just isn't Henry Ford's economy anymore.

SHAIKEN: There are very real economic pressures out there that push down on wages so it's not a simple story, but that doesn't mean that there isn't a core truth into what Ford found.

CWIEK: So a century after Henry Ford started paying $5 a day, it's not at all clear that today's employers and workers can reach a similar bargain and reboot a 21st century version of the working middle class. For NPR News, I'm Sara Cwiek in Detroit.

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