Henry Ford invented the middle class

Companies can pay more when believe they can achieve a sustainable increase revenue to cover the cost of the pay raises. This creates an increase in the number of products they sell.  Productivity is measured by the increase in this “throughput” of products.

When Henry Ford developed his assembly line, he knew he could cut the time it took to produce a car.  He also knew that he could cut the price of the car to increase sales.  He also knew that the car would contribute to increasing family business productivity and that many consumers would buy the truck version of the Model T to make deliveries of their produce faster. Many families bought the truck to go into the delivery business. He also knew that families with an average income would buy the Model T to increase their mobility for lots of reasons

He also knew that his increase in throughput would allow him to double the wage rate of his assembly workers from $2.50 a day to $5.00 a day, so his workers could actually afford to buy a car. So, in 1913, he introduced the Model T priced at $525 each. Assembly-line production allowed the price of the touring car version to be lowered from $850 in 1908 to less than $300 in 1925. 

In 1912, Ford produced 68,773 Model T Runabouts for $590 

In 1913, Ford produced 170,211 and sold them for $525.

In 1914, Ford produced 202,667 and sold them for $440. 

In 1915, Ford produced 308,162 and sold them for $390. 

Ford’s actions prompted all other manufacturers to adopt assembly lines to follow his lead. This kicked off the US economy and focused manufacturers on “process”.

Wages rose, consumers had more money and the middle class was born. This was a unique time in US history. Over a period of 20 years, the US consumer experienced a leap in their standard of living. The US consumer was getting electricity, automobiles, telephones, radios, washing machines, refrigerators, kitchen appliances, inside plumbing, sanitary sewers and clean water. US consumers got paved roads and moved to the suburbs.

The automobile encouraged travel and families enjoyed the novelty. Cities began to pave their streets. Movie theaters and restaurants began to appear on city streets and families traveled further distances. Family vacations by car became more prevalent. Family farmers went to town more often. Family businesses were created and family incomes rose.

Credit for this standard of living leap goes to the inventors who created the inventions and the industrialists who turned them into beneficial, useful products. The credit for kick-starting the creation of the US middle class goes to Henry Ford.

His “laws of economics” related to throughput has been the economic model ever since he introduced it and verified it by lowering prices to increase sales. He knew the “law of supply and demand”. We saw it with the price reductions in personal computers and flat screen TVs.

Norb Leahy, Dunwoody GA Tea Party Leader