Pay Increase Cost vs Benefits

The coming minimum wage increases –up to a dollar per hour raise for each of the next three or four years – have brought alarmist reaction from employer groups. In parallel, the public-sector unions are muscling up for a stoush.

After a remarkably placid few years, the employer concern is that a ratchet effect right across the industrial board will put pressure on competitiveness and even viability.  To these hysterical worrywarts, we veterans of the 70s and 80s would say “Get a Life!” Coping with double-digit wage inflation was character-building!

Nor does an increase in the payroll bring only cost. Benefits are likely to include higher retention, which in turn delivers lower recruitment and induction, retained and higher-level training outcomes, fewer accidents, smoother process flow and lower faults.  A higher wage bill also drives innovation, methods improvement, and technology investment. Most importantly, a cohesive workplace culture can flourish within a settled team of competent, co-operative operatives.

And what is the place of pay in the motivation of an employee?  Classic behaviourists like Herzberg and Maslow posited that pay was not a motivator, but a lower level need, a hygiene factor. In particular, Herzberg’s research showed that situational factors like pay, company policies and administration, working conditions, status, security, co-worker relationships and supervisory style could be irritants or dissatisfiers but not motivators. When the cacophony is turned off, the ensuing silence is not a motivator.

Motivators reside more in the job itself, when the employee gains the ability to achieve and, through achievement, to experience psychological growth. These comprise task opportunities for success, recognition and esteem, responsibility, advancement, job enrichment and the work itself.

More recent studies and thinking seem to suggest the binary view of Herzberg is useful but simplistic. A 2015 study by Glassdoor of over 100,000 crowd-surveyed American employees greatly informs the research. This study ranked the top five contributors to employee satisfaction as:

  • Culture and values
  • Career opportunities
  • Senior leadership
  • Work-life balance
  • Compensation and benefits,

with culture and values contributing double the weight of compensation and benefits.

It is interesting that strategy words – company purpose, direction, goals, innovation – do not excite employees. Seems Peter Drucker was right: “Culture eats strategy for breakfast”!

And the last word goes to a brilliant industrialist –

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