Wage Determination Theory and the Five-Dollar Day at Ford
- 1 June 1988
- journal article
- Published by Cambridge University Press (CUP) in The Journal of Economic History
- Vol. 48 (2) , 387-399
- https://doi.org/10.1017/s0022050700004988
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.Keywords
This publication has 2 references indexed in Scilit:
- Efficiency Wages and the Wage StructurePublished by National Bureau of Economic Research ,1986
- Wages, Employment and the Threat of Collective Action by WorkersPublished by National Bureau of Economic Research ,1986