The Expanded and Annotated My Life and Work

High Wages Prevent Turnover
The large wage had other results. In 1914, when the first plan went into effect, 
we had 14,000 employees and it had been necessary to hire at the rate of 
about 53,000 a year in order to keep a constant force of 14,000. In 1915 we 
had to hire only 6,508 men and the majority of these new men were taken on 
because of the growth of the business. With the old turnover of labour and 
our present force we should have to hire at the rate of nearly 200,000 men a 
year—which would be pretty nearly an impossible proposition. Even with 
the minimum of instruction that is required to master almost any job in our 
place, we cannot take on a new staff each morning, or each week, or each 
month; for, although a man may qualify for acceptable work at an acceptable 
rate of speed within two or three days, he will be able to do more after a year’s 
experience than he did at the beginning. The matter of labour turnover has 
not since bothered us; it is rather hard to give exact figures because when we 
are not running to capacity, we rotate some of the men in order to distribute 
the work among greatest number. This makes it hard to distinguish between 
the voluntary and involuntary exits. To-day we keep no figures; we now think 
so little of our turnover that we do not bother to keep records. As far as we 
know the turnover is somewhere between 3 per cent and 6 per cent a month.
We have made changes in the system, but we have not deviated from this 
principle:
If you expect a man to give his time and energy, fix his wages so that he 
will have no financial worries. It pays. Our profits, after paying good wages 
and a bonus—which bonus used to run around ten millions a year before we 

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114  •  The Expanded and Annotated My Life and Work
changed the system—show that paying good wages is the most profitable way 
of doing business.
There were objections to the bonus-on-conduct method of paying wages. 
It tended toward paternalism. Paternalism has no place in industry. 
Welfare work that consists in prying into employees’ private concerns is 
out of date. Men need counsel and men need help, oftentimes special help; 
and all this ought to be rendered for decency’s sake. But the broad workable 
plan of investment and participation will do more to solidify industry and 
strengthen organization than will any social work on the outside.
Without changing the principle we have changed the method of payment.

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115
9
Why Not Always Have Good Business?
This chapter addresses the issue of cyclical and variable demand, which 
is specifically the kind of demand that a company that produces large 
volumes is ill suited to meet. Ford also addresses money as a barrier to 
exchange as opposed to a medium of exchange, a concept that ties in with 
the issue of currency exchange rates. The remedy is to guide business 
according to the concept of service rather than finance.
* * *
The employer has to live by the year. The workman has to live by the year. 
But both of them, as a rule, work by the week. They get an order or a job 
when they can and at the price they can. During what is called a prosperous 
time, orders and jobs are plentiful. During a “dull” season they are scarce. 
Business is always either feasting or fasting and is always either “good” or 
“bad.” Although there is never a time when everyone has too much of this 
world’s goods—when everyone is too comfortable or too happy—there come 
periods when we have the astounding spectacle of a world hungry for goods 
and an industrial machine hungry for work and the two—the demand and 
the means of satisfying it—held apart by a money barrier. Both manufactur-
ing and employment are in-and-out affairs. Instead of a steady progression 
we go ahead by fits and starts—now going too fast, now stopping altogether. 
When a great many people want to buy, there is said to be a shortage of 
goods. When nobody wants to buy, there is said to be an overproduction 
of goods. I know that we have always had a shortage of goods, but I do not 
believe we have ever had an overproduction. We may have, at a particular 
time, too much of the wrong kind of goods. That is not overproduction—that 
is merely headless production. We may also have great stocks of goods at too 
high prices. That is not overproduction—it is either bad manufacturing or 
bad financing. Is business good or bad according to the dictates of fate? Must 
we accept the conditions as inevitable? Business is good or bad as we make 
it so. The only reason for growing crops, for mining, or for manufacturing, is 

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116  •  The Expanded and Annotated My Life and Work
that people may eat, keep warm, have clothing to wear, and articles to use. 
There is no other possible reason, yet that reason is forced into the back-
ground and instead we have operations carried on, not to the end of service, 
but to the end of making money—and this because we have evolved a system 
of money that instead of being a convenient medium of exchange, is at times 
a barrier to exchange. Of this more later.
We suffer frequent periods of so-called bad luck only because we man-
age so badly. If we had a vast crop failure, I can imagine the country going 
hungry, but I cannot conceive how it is that we tolerate hunger and poverty, 
when they grow solely out of bad management, and especially out of the bad 
management that is implicit in an unreasoned financial structure. Of course 
the war upset affairs in this country. It upset the whole world. There would 
have been no war had management been better. But the war alone is not 
to blame. The war showed up a great number of the defects of the financial 
system, but more than anything else it showed how insecure is business sup-
ported only by a money foundation. I do not know whether bad business is 
the result of bad financial methods or whether the wrong motive in business 
created bad financial methods, but I do know that, while it would be wholly 
undesirable to try to overturn the present financial system, it is wholly desir-
able to reshape business on the basis of service. Then a better financial system 
will have to come. The present system will drop out because it will have no 
reason for being. The process will have to be a gradual one.