Were that the case, we'd see a prevalence of people unable to afford cars. This is not the case. The cost of an automobile is an even smaller fraction of an average person's disposable income than it was during Henry Ford's day. And this isn't considering the fact that a modern car is far safer, more comfortable, more fuel efficient, and just broadly way better than a model T.
American workers are too highly paid to make many manufacturing jobs viable in the US. If GM et al. were to pay American workers more they would either not be making enough money to stay afloat, or the cost of their cars would rise considerably (and likely lose sales and not be profitable anyway).
So, let's compare the automotive industry then. I might be mistaken, but I'll try my best. And yes - I totally ignore taxes, healthcare, and anything else - which might be important, so... take it with a grain of salt.
In the year 1916, Henry Ford lowered the price of the Model T to 345 USD[1]. Using an inflation calculator[2], this tranlates to roughly 8120 US-$. At the same time, Ford raised the salary to 5 US-$ per day[1]. That makes 160 US-$ per Month (calculating with 4 x 5 days). Using the same calculator as in[2], we end up with a value of 3766 US-$. So a Model T costs 2.5 months of labour for an average worker.
Fast forward 2019 - the avarage salary is maybe 40k US-$ a year for an automotive worker?[3] So, using the same reference as above, this would translate to 166 US-$ per day, and 3320 US-$ per month.
Now, what's the successor of the Model T nowadays? I don't know - so I followed the "successor" links in the Model T wiki article[4], and ended up at the Ford Fusion. Ford says, it's starting at 23.170 US-$[5]. That's 7 months worth of labour for an average worker. So, yes - compared to 1916, it's 2.5 times more expensive.
Appreciative of the breakdown, but I think there might be some issues with your methodology.
For one, far fewer households today are single salary. Say what you will about whether this is a good or bad thing, but I think it's probably more appropriate to base the numbers on an "automotive household income" if that's such a thing.
Also, your salary resource is a little weak. It has a huge range ($34k-$144k average). I speculate this isn't relegated to just using automotive manufacturers but also includes their suppliers. Anecdotal experience shows me that the lowest paid Tier 2 union employees on a line make that much if you include overtime. Tier 1 workers make much more (close to double, in my experience). Then you take the skilled trades (e.g., electricians and machinists) where its more common than not to make six figures, all things considered. This is all before we're getting to the degreed engineers. Payscale.com shows average Ford engineer salary nearing $90k. Engineers on the line generally make more because of the work conditions and overtime (it wouldn't be uncommon for a process engineer to make double that). I don't know what the actual numbers are, but I wouldn't balk at data that's easily double the numbers you covered. It could easily be on-par or even below the Model-T numbers when it comes to monthly household income.
When Henry Ford set minimum salaries, he wasn't impacting the wages of the engineers who designed the cars - he was impacting the wages of those who made less than $5 at the time the change was made. A minimum wage was being set, not an 'average' wage. So comparing a $5 minimum wage to the 'average wage today including white collar workers like line engineers' fails to be a convincing comparison. It's even less convincing now that I realize, after reviewing your comment, that you're including overtime wages for "Tier 2 union employees" when MrGilbert's data specifically doesn't include overtime wages. If you need to work overtime today to have the same relative affordability as that available a century ago - that's not progress!
Yes, yes - perhaps the autoworkers we are talking about are not 'average' and own fewer cars per household. And yes, yes - moving the minimum wage probably resulted in wage increases for higher paid workers as well. If you want to move the goalposts again do some legwork and show some work, otherwise you're just promoting a paper-thin narrative on the basis of "but what if".
I think the 'more than one car per household' is a fair point but I think it gets watered down by the >1 car per driving adult...this may be just that we consume more, not need more. If that's the case, it implies vehicles are more accessible today, not less.
But I stand by the assertion that claiming a $40k average wage is way off. The base salary of most Tier 1 non-skilled employees was still in the $70k-$80k range, and this was years ago. The skilled trades made much more. This is without overtime. It seems like MrGilbert was cherry picking the data. And I hope you also realize that there is a difference between the manufacturing engineers and design engineers. Manufacturing engineers probably should be included in my opinion, and they are some of the highest paid, but I'd even be willing to concede that and still stand by the general point.
I included overtime because it is a such a large part of the manufacturing experience. And yes, some people game overtime as a way to inflate their wages. And the overtime pay increases didn't come about until the Fair Labor Standards Act. If you look at the history, the $5 per day wage actually does include overtime (if you define overtime by today's standards). We could debate whether or not this is progress (many of those I personally knew would call it progress because they wouldn't have the opportunity to make that wage elsewhere, which is why there is little turnover even today). I actually don't think it's unfair to include overtime to get the total compensation comparison, but even without overtime the $40k number seems pretty far off.
The larger point being, it's not as simple of a comparison as 'don't include overtime' and select the lower end of the overall automotive salaries (including lower paid suppliers). We can further complicate things by factoring in the preferred employee pricing etc. It's complicated, even if we want it to be a simple narrative.
The loss of manufacturing jobs is a big part of the reduction in size of the middle class United States, especially in the Rust Belt. This is largely due to automation reducing the number of available well-paying jobs not because the car companies are systematically mistreating workers. People still vie heavily for those jobs because they are some of the highest paying jobs available.
Introduction of the $5 daily wage also included a reduction in labor hours to 8 hours per day. So no, the $5 wage did not include overtime.
"To run the factory continuously instead of only eighteen hours a day, giving employment to several thousand more men by employing three shifts of eight hours each, instead of only two nine-hour shifts, as at present."
https://archive.nytimes.com/www.nytimes.com/learning/general...
Fair enough on the hours. But it's not wholly accurate to count the $5/day as a wage. About half of it was a 'bonus' if you met the "socialization" criteria like abstaining from drinking. They would literally perform home inspections. Men would have to give up the bonus if their wives worked. I think people look at this with some revisionist history; it wasn't as altruistic and I (personally) don't think it's an improvement over today.
Not to belabor the point, but it's not a simple one-to-one comparison like the OP was trying to demonstrate. I don't think the wages are nearly as bad as they made it out to be.
> It seems like MrGilbert was cherry picking the data.
I was not - I had to work with what I had, and I clearly stated at the beginning, that you have to take it with a grain of salt. However, I did not cherry pick any data. That‘s a false accusation.
Sorry, from my perspective it seemed like you took the lower end of that $34k-144k because it fit your point. At the very least, I would have thought the average would have been a fairer assumption. Chalk my mistake up to the limited information communicated in a forum format
Indeed it would be nice to see a more definite and representative source for income. I wonder, since the process is more complicated, you should now include both the line engineers and also the people working near minimum wage to make the parts for these cars. Did Ford make most of its own parts? How much was off the shelf, and were there industries that existed solely to make parts for these cars?
> For one, far fewer households today are single salary. Say what you will about whether this is a good or bad thing, but I think it's probably more appropriate to base the numbers on an "automotive household income" if that's such a thing.
How many households had two Model Ts, and how many households today have two cars?
>How many households had two Model Ts, and how many households today have two cars?
Like my response above, I think that's a valid and interesting point that should be factored in. I'd also be curious to see how much this plays into the overall debt load of consumers. I.e. does the necessity of dual-incomes force the need for multiple vehicles which in turn forces a higher debt load than previous generations? Where I come from, taking on vehicle debt is considered as much of a given as mortgage debt.
> Were that the case, we'd see a prevalence of people unable to afford cars.
Actually, I'd say that is precisely the case. The vast majority of cars in the US are bought on credit, which means people can't actually afford a car, they can only afford to borrow money to pay for a car for a few years, then get out of that one and move onto another one.
The massive, massive majority of vehicles are not owned by the person driving it, they're owned by banks.
The price of a model T in 1908 was $825 or $850 (google results vary). The median annual income was between $450 and $525 (again, sources vary). So a Model T cost 1.6 to 1.7 times the median income of a US worker. For a car that had no air conditioning, no radio, no airbags, and a top speed of 45 mph. Near the end of the production run (mid-late 20s) the cost of the model T had gone down by over half - thanks to production line manufacturing.
By comparison, the current US median income is just over $60k. You can buy many of these cars for less than half of that. Some less than a third: https://www.truecar.com/prices-new/kia/ Each of these cars is drastically safer, more comfortable, and with amenities like aircon radios and more.
Almost all the price-market comparisons from decades ago forget utility value of monetary and the shifting of disposable income for non-essential goods and services. Houses then cost the equivalent today of perhaps $80k as well. A better comparison may be around disposable income though which at the national average household income of about $70k to be a safe $15k, so cars should be about $20k. Except new car sale prices nowadays are about $30k and yet we know that most people making $70k for a family of four probably aren’t going around getting a new car.
Elizabeth Warren’s paper from a decade or two ago did a fair job doing some pricing comparisons of the day to turn of the century American household microeconomics and demonstrated the primary change in the past 100 years was the additional cost of a second bathroom.
And what was the disposable income in 1908 when the median us income was $500. If buying a $30k car is out of reach for a family making $70k a year, then I find it exceedingly hard to believe that a family making $500 in 1908 would be able to afford an $800 car.
Microeconomic comparisons are very easy to tweak to achieve a conclusion determined a priori. Some goods and services like electronics, air travel, communication, and transport become orders of magnitude cheaper over the course of the 20th century. Others like healthcare and housing on average get more expensive, especially in the latter half of the 20th century. If you want to show lowering costs of living, weight the model towards the former. If you want to show a higher cost of living, weight the model towards the latter.
I think the only American workers that are paid too highly for manufacturing jobs to thrive in the US are folks like this:
As Chairman and Chief Executive Officer at GENERAL MOTORS CO, Mary T. Barra made $21,870,450 in total compensation. Of this total $2,100,000 was received as a salary, $4,452,000 was received as a bonus, $3,425,006 was received in stock options, $11,081,760 was awarded as stock and $811,684 came from other types of compensation. This information is according to proxy statements filed for the 2018 fiscal year.
But Fiat doubled headcount, how was that possible if your argument that labour cost is the issue ? Let's not follow garden economics, greedy and laziness may be the root. BTW other auto companies are expanding except GM.
The real storm would be when next time they need bailout , would they be bailed out as US company?
> But Fiat doubled headcount ... BTW other auto companies are expanding except GM
GM's business is shrinking while most automakers have expanded in the last five years. It makes perfect sense that GM would contract their employee count as sales decline backwards by nearly two decades.
GM sales 2014: $155b | 2018: $147b
Their sales in 2005 were $193b by comparison. Automotive sales were $158b that same year.
> The cost of an automobile is an even smaller fraction of an average person's disposable income than it was during Henry Ford's day.
I seriously doubt that... at $50,000+ for a new pickup, and $35,000+ for a new car? And used vehicles are still quite expensive as well (unless you buy an absolute pile of junk).
Financing terms keep stretching longer to keep the appearance of an affordable monthly payment, but many Americans have become wary of the overall cost of a vehicle, which is by no means low today.
I think the SmartCar didn't sell in the US because the mileage was shockingly bad. You'd expect 100mpg for something that small and light. It didn't seem 'smart' to American buyers at all.
American workers are too highly paid to make many manufacturing jobs viable in the US. If GM et al. were to pay American workers more they would either not be making enough money to stay afloat, or the cost of their cars would rise considerably (and likely lose sales and not be profitable anyway).