Question

Why did Henry Ford pay above-average wage for the workers in his assembly plants? You can find answer tips from ConceptClips: Efficiency Wages in ch 28.

Answer 1

Henry Ford made the payment of above the average pay, because Henry Ford strongly believed in the theory of efficient wages that paying higher wages, bring positive motivation, higher purchasing power, healthier workers and workers also contribute with a higher level of engagement and superior productivity to achieve the organizational goals. It makes organization to achieve more profit than the expenses made upon the workers in paying above the average wages. These are the conceptual understanding and implication of offering efficient wages under the efficient wage theory that made Henry Ford to take the step of paying above the average wages. It helped to get higher productivity level by the end of workers.

It is for the example that Henry Ford paid $5 per day when average ongoing wage rate was $2 to $3 per day. It was the case during 1914.