How have assembly lines helped develop economy?

1372 words (5 pages) Essay

1st Jan 1970 Economics Reference this


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How assembly line had helped the development economy of a country and a company? Model T sold for about $800 in 1908. But the assembly line lowered Ford’s cost so much that he could decrease the Model T’s price to as low as $290 in 1915. A car can be made in ninety minute by using assembly line technique. The production increased from 475 cars in a nine-hour day to over 1200 cars in an eight-hour day. That year he sold up to one million cars. This is the first time that ordinary Americans is able to afford get a car. Ford had found many ways to cut cost and offer cheaper price product. He instructed his supplier the way to assemble the wood crates that were used to ship the automobile parts to him. The crates were then dismantled and used within the car. The scrapes that left over were made into charcoal and sold under the name of ‘Kingsford’. With the aid of assembly line, the cost of labor has also depreciated. This is because with the not as many labor were required as it is before the existence of the assembly line. Furthermore, the due to the faded term of unskilled and skilled workers, there is no longer wage discrimination needed to be done by the employer upon the workers.

During the 1920s, automobile had allowed more people to leave the inner city and live somewhere else without changing their jobs. More people purchased houses in new residential area as more roads were constructed to link the metropolitan centers. After one decade, these suburbs had grown and making cars to become a necessity goods than luxury goods. The other factor that has made cars no longer classified as a luxury good is due to the reduction in cost of production. The fall of cost of production has made the prices of cars to decrease as well and enabled many people to have the purchasing power. With the convenience of the car and road, people would have no trouble getting to their respective destination and this had allowed them to live at places of their choice. There will be an increase in demand of automobile during that decade due to automobile as a necessity for most people to travel to work that period of time. In 1930 almost one out of three United States citizens had a car in their house. The better and improved quality of road is built across America. Many states started to tax motor fuel to help build and maintain the highways. New repair shops, roadside restaurants and motels were pioneered. The assembly line that was implemented has caused not only the automobile industry to grow but tire industry also experience prosperity.

In this increasing demand for car had trickled down many other industries. One of the industries that flourish is oil industry. As the number of cars on the road has rise, the demand of oil also will increase thoroughly. High demand of oil and low supply of oil will cause the oil price to rise. In order restore the economy; setting up new wells in Texas and the Southwest is necessary to increase the supply of the oil. An increase of supply of oil will enable the price to drop back to normal price, so that the economic in the oil production line can be restored. In 1918, oil price increased by 20 percent. After new well is discovered and dug, the oil price falls by 10 percent in 1922. The oil price continues to drop from year 1930 to year 1934 up to 10 percent. Many new gas service stations were established on the highways. At the outbreak of World War Two, many automobiles manufacturers shut down their assembly lines to build weapons or machines that vital to win the war. After World War Two happened, oil price struck up by 20 percent for several years due to the priority of oil consumption was for the machines or automobile on war. So, supply of oil in the market will decrease and increase in oil price level will occurs. This lead to the depression that occurs in

Invention of cars and assembly line had lead to economic growth. With this new technological method, Ford’s company’s profits increase from $30 million dollar in 1914 to $60 million dollar in 1916. Ford’s company profits had doubled from that period of time. The economy experienced growth of 7 to 10 percent for the first six years of 1920s. The United States total income rose from $74.3 billion dollar in 1923 to $89 billion in 1929. Ford, General Motors and Chrysler, known as “The Big Three”, had reached their peaks in the 1950s, when they are together; they controlled more than 90 percent of the United States market. In 1978 Ford profit for the year was $2.2billion dollar. By late 1990s the automotive industry had added $100 billion dollar in the gross domestic product to the United States economy. This can prove that the success of the idea of assembly line that created by Henry Ford.

Besides that, assembly line work is extremely tedious. It leads workers to turnover and finds a new job. To reduce the amount of constant turnover of employees, Ford used a theory called efficiency wages. Efficiency wages are wages, which paid by firms that are higher than the market in that time. Efficiency wages can motive workers to work at their best effort, better paid workers eat a better diet and thus are more productive, higher paid worker is less likely to look for another job and attract a better pool of workers to apply for jobs. Ford had increased the wages of its workers to five dollar a day. The automotive industry has developed a rising standard of living for its workers by paying wages that ranked at the top of the whole industrial sector. About forty seven percent of Ford workers owned their own cars. From then, the working hours for every worker decrease from nine hours to eight hours every day. Decrease in working hours can make worker happier as they have more time to spend time with their family. It also helps the company to increase the productivity of individual as the worker is happy to work for the company.

Technological advancements in the late 1970s and early 1980s brought a new outlook to the automobile industry. New technology is bought into that period of year. The development of the robot for manufacturing had a remarkable change in the automobile industry. With Henry Fords’ idea, assembly line and these wonderful machines have boosted the production even more. The robots could assemble cars and car parts at a much greater rate of precision and at a much faster speed than the average human. The duration of work for a robot compare to an average human is much longer. Robots also can work 24 hours a day and seven days a week. With the usage of robots in the assembly line, employer will not have to face trouble such as worker turnover or strikes by them. The use of robotics provided the perfect solution for large automobile producers. Robots can switch from one task to another task without any downtime. Robots have increased the supplies of car in the market since then. Since robots couldn’t operate without the help of human. So, it requires some highly skilled technicians to monitor the process. New demand of higher paying jobs and higher skill level jobs in the automobile industry is created and filled up. These incentives led companies altering the standard method of production, which established in the Ford and Volkswagen plants.

Robots has also brought along some of the negative effects that will influence the economy. Although there are new jobs created during this switch, but the downturn in demand of production. This will be the best opportunity and excuses for company to fire the entire unskilled worker, instead of retrain the workers because it cost more to retrain the workers than hire a new batch of workers. It left many unskilled workers in the manufacturing plants unemployed. This incidence leads the unemployment in the United States to rise. When most workers lose their jobs might have influenced their decision when purchasing a new car, as they don’t have stable income to buy new cars. This could indirectly hurt the automobile industry because they could lose a very big market of potential buyers since robot are not human which needs car to travel around.

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