Human Resource Management: Labor Wage - Essay Example

Human Resource Management 326 Introduction This paper represents one important area of human resource management that is labor wage. Minimum wage creates unemployment and discourages workers from working hard and acquiring required skills for work. The impact of minimum wage on productivity and unemployment has been discussed in this paper. Other type of wage, i.e. living wage, is also considered as even greater disincentives for the workers in terms of skill acquirement and work effort. This paper will also discuss the effect of living wage on productivity. Wage and labor are positively related to each other and both also have a positive relation with the productivity. Organizations get a different level of output from the workers by paying through different payment schemes such as skill based pay, incentive pay, payment on standard market rate or even payment according to minimum cost of living and different social norms. So, this paper contains a detailed discussion of the effect of different payment schemes on productivity and, most importantly, on the workers. Types of Wage Payment Generally, two types of employers are there in an economy. One are government agencies and the other are private organizations. Both of these institutions pay the workers through different payment policies but desire adequate productivity based on organizational requirements, capabilities of employees, skills and knowledge and experience. Minimum wage is the lowest wage rate paid by the employers to the workers on an hourly basis, daily basis, or on a monthly basis. It is the employer who decides. Similarly, according to workers’ perspective, it can be said that minimum wage is the lowest wage rate at which workers provide their labor to the employers. Though minimum wage payment is effected by many jurisdictions in many countries, several opinions exist for the benefit and drawback of this wage payment concept in terms of both the workers and the employer’s perspective. Supporters of positive outcomes of minimum wage say that minimum wage enhances the standard of living of people, reduces poverty and also forces the business organizations to focus on the workers’ interest rather than only profit for the organizations. On the other hand, opponents of this payment method have been providing more evidence and supportive analysis for the drawbacks of this payment policy. They have argued that it increases the unemployment especially for the low skilled workers who do not have minimum skills and knowledge to provide labor for getting the minimum wage rate of a country. It forces these lower level workers to work in order to only meet their minimum basic needs.. This situation increases the unemployment and poverty in an economy. Living wage is another wage policy which workers need to be paid on the basis of necessary income required for living. Basic necessity for living includes food, clothing and shelters that are in the first stage of Maslow’s hierarchy of needs model. In some countries such as Switzerland and United Kingdom, this wage policy means that a person will work for forty hours in a week with no additional income and he or she needs to be able to afford a living standard which includes food, shelter, transport, healthcare and some sort of recreation for motivation to work. Supporters of this concept urged that living wage is equivalent to the poverty line of a single earning person in a family of four in terms of wage rate or income level. The opponents of this payment policy have argued that living wage can be lower than poverty threshold or poverty line as it is measured based on the income and necessary expense of an individual worker, whereas poverty line is measured on the basis of household units. Skill Based Pay Skill based pay is the policy for payment to the workers on the basis of their skills and output of their labor or individual productivity. This type of payment policy is structured for different levels of skills. There are no boundaries or limits developed for a particular type of skills. Rather, a worker is paid according to the effectiveness and the benefit from the skill he or she is having and can implement at work. So, the wage rate increases with a higher extent of skills and knowledge as multi-skilled people are paid more than a worker having a monotonous skill for working in a narrow area. Skill based pay is better for organizational benefit in terms of the wage labor ratio. Workers also have desire to enhance their skills in multiple areas or willingness to become savvy experts in a specific area for getting a higher wage. So, this payment policy is better than minimum wage policy because people do not desire to enhance their skills for getting higher remuneration until they get reward for their higher skills. Incentive Pay Incentive pay is known as pay for performance. Incentive is given to the workers by the employers for more than expected standard performance. It is a motivational tool that the employers use to enhance the performance of the workers. Two types of incentive payments are followed by organizations, including causal incentive and structured incentive. People always thrive for positive feedback or reward on successful completion of a given task or achievement. So, causal incentive communicates to the workers that the organization notices their hard work and well accept their contribution to the organizational achievement. Though minimum wage is implemented to secure a minimum monetary value for the workers for their work, it does not support the workers who provide more output than expected from them. Standard Market Rates Many organizations, especially private organizations, follow this payment policy in a competitive labor market. All organizations desire to get best expertise from the labor market for different divisional work to get optimum output by skill, knowledge and experience of the workers. So, these experienced employees fix value for their labor according to the market demand of their skills, knowledge and experience. They are offered wage on the basis of market standards to meet their salary expectations. Payment on the basis of standard market rate informs an employee about his or her standard wage in the market and they become satisfied only when they get wage at a standard market rate. It also motivates the workers to gather knowledge and skills for increasing their wage rate in the market. On the other hand, the minimum wage policy is a standardized payment structure that all organizations are forced by the government to offer to the employees. This policy does not value skills or knowledge of workers and does not act as a motivational factor for the workers who have adequate skills and knowledge either. Minimum Wage vs. Productivity and Unemployment Labor market works under political and economic protectionism regulated by the government. Small private organizations could not hire employees based on the market demand of their skills, knowledge etc. Though this policy forces the organizations to maintain minimum wage for all the workers, it is one of the important reasons for unemployment even in a little declining economic condition in a country or lower market demand in regional market or in the overall industry. When an organization is running in a condition of lower revenue, then it might not pay efficiently to the workers due to inadequate operation revenue. But the organizations are still able to retain their workers by lower wage payment. Minimum wage policy forces the employers to ask to leave the organization because they are unable to pay the minimum wage to the workers in a poor economic condition. These workers will defiantly try to find other organizations and they have to again start from the same minimum wage rate. So, their experience would not be beneficial for the increase of lower salary payment. It also forces the low skilled workers to assess unfair means of earning. As this payment policy does not value the skills and knowledge of the workers, they are influenced to enhance their skills in order to get decent income in future. So, productivity of the workers will not increase, especially that of lower level workers, because no motivational factor influences them to provide more labor for the organization (Marshalle 195). Living Wage vs. Work Effort and Skill Acquirement Living wage policy secures a minimum standard of living of the workers that includes some basic needs. It only covers the minimum living expenses of a single worker, not the whole family that might be dependent on one earning member. It does not value the skills and knowledge of the workers and does not act as motivational influence for the workers to acquire skills in a wide area or even work hard for better productivity for the organization either. This policy is worse than minimum wage as government structures minimum wage rate by considering the inflation rate and cost of living, but living wage does not increase with the improvement of the economy of a country. On the other hand, organizations do not grow if the organizational profit increases with the increasing market demand. So, it becomes a stronger disincentive for the workers to make better work efforts. Conclusion Minimum wage and living wage have many limitations that act toa greater extent than its benefits, but many economies follow minimum wage for workers in the government agencies. It makes unskilled workers unemployable because they become ineligible in terms of minimum skill and knowledge required to get minimum wage. So, minimum wage should focus on the low skilled workers to generate employment opportunities. Because of lower productivity and lack of motivation by the minimum wage payment policy, the private organizations prefer to follow skill based pay to provide the employment opportunity for all skilled workers and influence them to gather multiple skills for getting decent income. Works Cited Marshalle, Mary I. Economics of Unemployment. Nova Publishers, 2006. Print. 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