How Henry Ford Got New Workers

The role of immigration in economic growth

I started my working life working the swing shift, from 4pm to midnight. When I worked at Marconi Avionics in the late 1970s, early 1980s, this meant I got paid time and a half. In academia, I got a lot of freedom to choose my classes, if I taught macroeconomics. I often taught in the afternoons and evenings.

That kind of work schedule was due in part to the efforts of Henry Ford.

Henry Ford’s worker “problem”

In 1903, Henry Ford opened his first Detroit-based car manufacturing plant. His dream was to “build a means of transportation that any middle-income American could afford.” But by 1908 he had trouble keeping reliable workers. At one point, the Ford Motor Company had to hire ten workers for every one worker that they needed to work that week.

He first turned to what we now call efficiency wages.

Efficiency wages are when you pay more than the market wage to attract the right kind of worker. The goal is to pay workers more, so that you can combat attrition, increase morale, and increase commitment.

Ford doubled the then current wage per day to $5 a day. He also reduced the number of hours that full-time workers worked each day. And he reduced the number of days, setting the US on a path to its most common workweek—40 hours a week over five days a week. This higher wage meant that the opportunity cost of seeking new work or not showing up for work to begin with went up—a lot.

Opportunity cost is the value of what you give up or the value of the next best alternative.

As the costs of staying home from work rose, worker attrition fell.

Ford could also plan for shift work. Instead of working long exhausting days, he could hire more workers to work the swing shift. Today, in a manufacturing environment, this translates into three shifts: eight to four, a swing shift from 4pm-midnight, and an overnight shift, from midnight to 8am.

But Henry Ford did more to find and keep workers.

He needed workers to help his company grow. Ford began using an assembly line, increasing productivity, and leading to growth. According to the Alliance for Automotive Innovation, the automotive ecosystem, including parts and labor, accounts for nearly five (5) percent of GDP.

Finding more workers

When workers are hard to find, a firm has four sources of new workers: from those who are unemployed, those who are out of the labor market, poaching workers from other companies, and immigration.

During the late 1990s and during the pandemic workers were hard to find. Firms scavenged for workers from other companies, from those who were out of the labor force, and from those who were unemployed.

Unemployment fell below the natural rate—the noninflationary rate of unemployment.

During the pandemic wages skyrocketed. Falling unemployment boosted inflation. Inflation was already rising. Factories and ports shuttered reducing domestic production, even as demand for goods and services rose. China’s zero-COVID policies pushed the prices of materials higher. Outbreaks in Malaysia limited the supply of new computer chips.

The automobile industry shut down as a result.

Our borders closed for 19 months. However, during the post lockdown period, 7.2 million immigrants entered the country illegally. A change in the perception of how open American borders were, along with strife in Central America caused an overwhelming number of people to cross into the US.

Many of the immigrants filled the gap between how many workers were needed and how many were available. Wage gains fell to normal levels.

Henry Ford and immigrants

As for Henry Ford, he actively sought out immigrants to work at his factories. The original Model T plant, now abandoned, was the site of one of the most prolific workforces assembled.

According to Jacklyn Bezaire, “Ford’s firm was the first among auto manufacturers to make efforts in recruiting international workers – from skilled workers in industrial Scotland and England, to German metal and wood workers, to even smaller villages in Central and Eastern Europe, the Middle East and Mexico. Word of mouth was the biggest recruitment aid – many had heard about the "wonderful city of the magic motor” and its opportunities.” [1]

But Ford ran into a language barrier.

His supervisors were native born and most of his factory workers were not. Most of the men working in the factories were recent immigrants from 53 countries speaking 100 different languages. So, he started English as a Second Language (ESL) classes to help his workers and supervisors communicate.

He also had to get the immigrants to Michigan. First, they sailed across the Atlantic. Then they had to get from New York City to Detroit. Without prior improvements in transportation, Henry Ford could never have gotten his employees to the plant, nor would he have any reason for producing the Model T in the first place.

Ford didn’t always treat everyone with respect or consideration. But he did find a way to fulfill his dream, “building a means of transportation any middle-income American could afford,” using the factors of production, including his workforce. [2]

And in so doing, he helped the economy grow.

Just as immigration did post-lockdown.

Thank you for reading,

Nikki

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[1] https://www.linkedin.com/pulse/early-recruiting-efforts-henry-ford-motor-company-jacklyn-bezaire/

[2] Background information is from The Henry Ford (www.thehenryford.org).