Ford was having trouble retaining workers. Factory conditions back then were incredibly lousy, especially in the summer. Keep in mind that AC hadn't been invented yet. They crunched some numbers and realized that if they paid their workers more and retained them, it would be cheaper than retraining workers left and right all the time and having too little productivity while the new workers got up to speed.
So they instituted the $5 day, and got heaps of fabulous free PR as a result. They spun it to say they were doing it so all their employees could afford to buy Fords, but this was pure propaganda designed to make the company look better during a time it was taking heat because of how much money it was making.
When the depression came around they quietly killed the $5 day since they could keep workers for much less with such a high unemployment rate.
And thus a myth was born. "Smart" employers pay their workers enough to buy the products they are making. To realize how silly the concept is, imagine if Boeing or Airbus instituted a similar policy. Laughable isn't it?