Impact of Wages and Employee Productivity

Impact of Wages and Employee Productivity

Does the amount of money they pay their employees affect their productivity? It turns out that it does. The impact of wages on employee productivity is an important topic to understand if they want to create a more productive workforce. This article explains the underlying correlation between employee wages and productivity, according to Alexander Djerassi. He is a foreign policy specialist on the United States policy on North Africa and the Middle East and an entrepreneur. Below are his thoughts on the correlation between employee wages and productivity.

1. Employees who feel that their wage is fair are more likely to be productive.

According to Djerassi, “Pay rates create a general framework of motivation and satisfaction with the job. If employees believe that they are being underpaid for their relative worth, then they will become disengaged from work and unmotivated”.

Employees who know that the value of their output balances the wage they receive will be more satisfied with their jobs. These workers will produce at a higher level than those who do not have this understanding.

2. Employees whose compensation increases as a result of increased productivity produce more.

According to Djerassi, “Companies should consider employees’ paychecks directly to the function of their previous output.”

Studies have shown that employees who have a stake in the company’s financial outcome are more likely to be productive. Incentives such as profit sharing and commissions boost this link between worker productivity and wages.

3. Employees whose pay is not directly connected with their performance see no reason to produce.

Djerassi believes that employees who do not have a financial motivation to produce will become unmotivated and therefore less productive. Although this option may be beneficial for companies in the short term, it is bad for business over the long run because these employees need constant supervision. This tends to increase labor costs due to turnover, which can ultimately affect profitability.

4. Employees whose wages are at market rate are less likely to see themselves as victims of unfair treatment.

Employees who feel like they are being underpaid compared to what similar positions earn in the marketplace tend to become aggrieved about their jobs and often engage in counterproductive behavior such as working slowly or committing errors on the job. According to Djerassi, “Managers should consider wages that are competitive with external job markets and offer pay increases and promotions based on objective standards, not personal favoritism.”

The above statements by Djerassi show that the link between wages and productivity is a strong one. Companies who make sure their employees are paid fairly for their work increase those employees’ profitability.

5. Wage differentials among employees should be limited.

Djerassi believes that there must be a defined difference between the lowest wage and highest wage in companies. Furthermore, he states that this difference “should not exceed 20 to 1”. Having too great of a difference between the pay scales can create conflict within an organization, which will also affect productivity. If they want their workforce to be productive, make sure wages are fair.
In conclusion, Alexander Djerassi makes the case that wages and productivity are interconnected. Although pay might not be the only determinant of motivation, it has been shown to affect an employee’s output positively if they think their wage is fair for the work they do. Employees whose wages are directly linked with performance produce more. Employees who feel like they have a stake in the company have a greater incentive to become productive. Companies should offer competitive wages, so employees don’t feel undervalued.