In 1913, the Ford Motor Company decided to pay its employees $5 a day. This wage was significantly higher than what any other organization offered. Henry Ford believed that this wage would make his employees happier, increase their productivity, and lower employee turnover. Economists would say that Mr. Ford offered his employees

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Henry Ford's decision to pay his employees $5 a day was an example of an efficiency wage. This is a wage that is higher than the market equilibrium in order to motivate workers to be more productive and reduce employee turnover. By paying a higher wage, Mr. Ford was able to attract and retain better employees and increase the efficiency of his production line.

In 1913, the Ford Motor Company Decided to Pay Its