The first widelycited example of efficiency wages is Henry F

The first widely-cited example of \"efficiency wages\" is Henry Ford\'s more than doubling the wages of his auto workers in 1914.

(1) What was Ford\'s motivation in doing this?

(2) What was the result of the \"experiment\"? Why did it work?

(3) What other reason is there for overpaying workers?

Solution

(1) What was Ford\'s motivation in doing this?

“Failure is only the opportunity more intelligently to begin again.”

“The only real mistake is the one from which we learn nothing.”

(2) What was the result of the \"experiment\"? Why did it work?

Although Ford did not invent the automobile or the assembly line,^[1] he developed and manufactured the first automobile that many middle class Americans could afford. In doing so, Ford converted the automobile from an expensive curiosity into a practical conveyance that would profoundly impact the landscape of the twentieth century. His introduction of the Model T automobile revolutionized transportation and American industry. As the owner of the Ford Motor Company, he became one of the richest and best-known people in the world. He is credited with \"Fordism\": mass production of inexpensive goods coupled with high wages for workers. Ford had a global vision, with consumerism as the key to peace. His intense commitment to systematically lowering costs resulted in many technical and business innovations, including a franchise system that put dealerships throughout most of North America and in major cities on six continents. Ford left most of his vast wealth to the Ford Foundation and arranged for his family to control the company permanently.

(3) What other reason is there for overpaying workers?