My Life and Work
pockets of men who do not assist in production. In order to create a
system which shall be as independent of the good-will of benevolent
employers as of the ill-will of selfish ones, we shall have to find a
basis in the actual facts of life itself.
It costs just as much physical strength to turn out a day's work when
wheat is $1 a bushel, as when wheat is $2.50 a bushel. Eggs may be 12
cents a dozen or 90 cents a dozen. What difference does it make in the
units of energy a man uses in a productive day's work? If only the man
himself were concerned, the cost of his maintenance and the profit he
ought to have would be a simple matter. But he is not just an
individual. He is a citizen, contributing to the welfare of the nation.
He is a householder. He is perhaps a father with children who must be
reared to usefulness on what he is able to earn. We must reckon with all
these facts. How are you going to figure the contribution of the home to
the day's work? You pay the man for his work, but how much does that
work owe to his home? How much to his position as a citizen? How much to
his position as a father? The man does the work in the shop, but his
wife does the work in the home. The shop must pay them both. On what
system of figuring is the home going to find its place on the cost
sheets of the day's work? Is the man's own livelihood to be regarded as
the "cost"? And is his ability to have a home and family the "profit"?
Is the profit on a day's work to be computed on a cash basis only,
measured by the amount a man has left over after his own and his
family's wants are all supplied? Or are all these relationships to be
considered strictly under head of cost, and the profit to be computed
entirely outside of them? That is, after having supported himself and
family, clothed them, housed them, educated them, given them the
privileges incident to their standard of living, ought there to be
provision made for still something more in the way of savings profit?
And are all properly chargeable to the day's work? I think they are.
Otherwise, we have the hideous prospect of little children and their
mothers being forced out to work.
These are questions which call for accurate observation and computation.
Perhaps there is no one item connected with our economic life that would
surprise us more than a knowledge of just what burdens the day's work.
It is perhaps possible accurately to determine--albeit with considerable
interference with the day's work itself--how much energy the day's work
takes out of a man. But it is not at all possible accurately to
determine how much it will require to put back that energy into him
against the next day's demands. Nor is it possible to determine how much
of that expended energy he will never be able to get back at all.
Economics has never yet devised a sinking fund for the replacement of
the strength of a worker. It is possible to set up a kind of sinking
fund in the form of old-age pensions. But pensions do not attend to the
profit which each day's labour ought to yield in order to take care of
all of life's overhead, of all physical losses, and of the inevitable
deterioration of the manual worker.
The best wages that have up to date ever been paid are not nearly as
high as they ought to be. Business is not yet sufficiently well
organized and its objectives are not yet sufficiently clear to make it
possible to pay more than a fraction of the wages that ought to be paid.
That is part of the work we have before us. It does not help toward a
solution to talk about abolishing the wage system and substituting
communal ownership. The wage system is the only one that we have, under
which contributions to production can be rewarded according to their
worth. Take away the wage measure and we shall have universal injustice.
Perfect the system and we may have universal justice.
I have learned through the years a good deal about wages. I believe in
the first place that, all other considerations aside, our own sales
depend in a measure upon the wages we pay. If we can distribute high
wages, then that money is going to be spent and it will serve to make
storekeepers and distributors and manufacturers and workers in other
lines more prosperous and their prosperity will be reflected in our
sales. Country-wide high wages spell country-wide prosperity, provided,
however, the higher wages are paid for higher production. Paying high
wages and lowering production is starting down the incline toward dull
business.
It took us some time to get our bearings on wages, and it was not until
we had gone thoroughly into production on "Model T," that it was
possible to figure out what wages ought to be. Before then we had had
some profit sharing. We had at the end of each year, for some years
past, divided a percentage of our earnings with the employees. For
instance, as long ago as 1909 we distributed eighty thousand dollars on
the basis of years of service. A one-year man received 5 per cent. of
his year's wages; a two-year man, 7-1/2 per cent., and a three-year man,
10 per cent. The objection to that plan was that it had no direct
connection with the day's work. A man did not get his share until long
after his work was done and then it came to him almost in the way of a
present. It is always unfortunate to have wages tinged with charity.
And then, too, the wages were not scientifically adjusted to the jobs.
The man in job "A" might get one rate and the man in job "B" a higher
rate, while as a matter of fact job "A" might require more skill or
exertion than job "B." A great deal of inequity creeps into wage rates
unless both the employer and the employee know that the rate paid has
been arrived at by something better than a guess. Therefore, starting
about 1913 we had time studies made of all the thousands of operations
in the shops. By a time study it is possible theoretically to determine
what a man's output should be. Then, making large allowances, it is
further possible to get at a satisfactory standard output for a day,
and, taking into consideration the skill, to arrive at a rate which will
express with fair accuracy the amount of skill and exertion that goes
into a job--and how much is to be expected from the man in the job in
return for the wage. Without scientific study the employer does not know
why he is paying a wage and the worker does not know why he is getting
it. On the time figures all of the jobs in our factory were standardized
and rates set.
We do not have piece work. Some of the men are paid by the day and some
are paid by the hour, but in practically every case there is a required
standard output below which a man is not expected to fall. Were it
otherwise, neither the workman nor ourselves would know whether or not
wages were being earned. There must be a fixed day's work before a real
wage can be paid. Watchmen are paid for presence. Workmen are paid for
work.
Having these facts in hand we announced and put into operation in
January, 1914, a kind of profit-sharing plan in which the minimum wage
for any class of work and under certain conditions was five dollars a
day. At the same time we reduced the working day to eight hours--it had
been nine--and the week to forty-eight hours. This was entirely a
voluntary act. All of our wage rates have been voluntary. It was to our
way of thinking an act of social justice, and in the last analysis we
did it for our own satisfaction of mind. There is a pleasure in feeling
that you have made others happy--that you have lessened in some degree
the burdens of your fellow-men--that you have provided a margin out of
which may be had pleasure and saving. Good-will is one of the few really
important assets of life. A determined man can win almost anything that
he goes after, but unless, in his getting, he gains good will he has not
profited much.
There was, however, no charity in any way involved. That was not
generally understood. Many employers thought we were just making the
announcement because we were prosperous and wanted advertising and they
condemned us because we were upsetting standards--violating the custom
of paying a man the smallest amount he would take. There is nothing to
such standards and customs. They have to be wiped out. Some day they
will be. Otherwise, we cannot abolish poverty. We made the change not
merely because we wanted to pay higher wages and thought we could pay
them. We wanted to pay these wages so that the business would be on a
lasting foundation. We were not distributing anything--we were building
for the future. A low wage business is always insecure.
Probably few industrial announcements have created a more world-wide
comment than did this one, and hardly any one got the facts quite right.
Workmen quite generally believed that they were going to get five
dollars a day, regardless of what work they did.
The facts were somewhat different from the general impression. The plan
was to distribute profits, but instead of waiting until the profits had
been earned--to approximate them in advance and to add them, under
certain conditions, to the wages of those persons who had been in the
employ of the company for six months or more. It was classified
participation among three classes of employees:
(1) Married men living with and taking good care of their families.
(2) Single men over twenty-two years of age who are of proved thrifty
habits.
(3) Young men under twenty-two years of age, and women who are the sole
support of some next of kin.
A man was first to be paid his just wages--which were then on an average
of about fifteen per cent. above the usual market wage. He was then
eligible to a certain profit. His wages plus his profit were calculated
to give a minimum daily income of five dollars. The profit sharing rate
was divided on an hour basis and was credited to the hourly wage rate,
so as to give those receiving the lowest hourly rate the largest
proportion of profits. It was paid every two weeks with the wages. For
example, a man who received thirty-four cents an hour had a profit rate
of twenty-eight and one half cents an hour--which would give him a daily
income of five dollars. A man receiving fifty-four cents an hour would
have a profit rate of twenty-one cents an hour--which would give him a
daily income of six dollars.
It was a sort of prosperity-sharing plan. But on conditions. The man
and his home had to come up to certain standards of cleanliness and
citizenship. Nothing paternal was intended!--a certain amount of
paternalism did develop, and that is one reason why the whole plan and
the social welfare department were readjusted. But in the beginning
the idea was that there should be a very definite incentive to better
living and that the very best incentive was a money premium on proper
living. A man who is living aright will do his work aright. And then,
too, we wanted to avoid the possibility of lowering the standard of
work through an increased wage. It was demonstrated in war time that
too quickly increasing a man's pay sometimes increases only his
cupidity and therefore decreases his earning power. If, in the
beginning, we had simply put the increase in the pay envelopes, then
very likely the work standards would have broken down. The pay of
about half the men was doubled in the new plan; it might have been
taken as "easy money." The thought of easy money breaks down work.
There is a danger in too rapidly raising the pay of any man--whether
he previously received one dollar or one hundred dollars a day. In
fact, if the salary of a hundred-dollar-a-day man were increased
overnight to three hundred dollars a day he would probably make a
bigger fool of himself than the working man whose pay is increased
from one dollar to three dollars an hour. The man with the larger