Effects of Corporations Paying Low Wages to Their Employees

Home Articles Effects of Corporations Paying Low Wages to Their Employees

Wage is a term coined for the monetary benefits provided to a person (basically labour) in exchange for their contribution to production processes. Labour is one of the most important entities of production. All the other entities (like land, capital, etc.) that are responsible for production will be of no use if the labour is missing. Labour was also termed as “creator of all value” by Karl Marx. Therefore, we can conclude wages as a sum of money provided to labour by their employer in exchange for their work. These wages can be fixed or dynamically vary depending upon the nature and severity of the tasks. Not to forget, the demand-supply rule applies here successfully. It can be fixed on an hourly basis or daily wage based for a measured fixed amount of work. Wages are involved while developing a balance sheet under the expenses section i.e., it is considered as an organizational expense necessary to run the business. In the year 1938, United States of America introduced the Fair Labor Standards Act which mentioned the rate of labour on an hourly basis to be 25 cents. Fast Forward to the era of Great Depression when almost 25% of the total working population was unemployed, employers took advantage of the situation and started utilizing labour by paying them much lesser than what they actually deserved. The government took a dig on this situation and made a minimum wage act which was a revision of the previous act. It set the hourly charges to be $7.25.

Various studies were performed which listed out various reasons for an organization to pay fewer wages to their employees. Some of the reasons are- change in organizational hierarchy, change in demand of products, change in demand for the services being provided by the organization. The studies also showed various different effects that the low wages pay structure causes on the labour. Few of them are-

Anger: this is the result of the general human tendency of expecting and not getting the desired results. Any employee who is working hard for the organization, expects the organization to be fair while paying their wages. They neither expect more than that or less than that. However, when the organizations pay them lesser than their desired wage, it creates anger in them towards the management. They might start protesting against the organization for obvious reasons.

Increased levels of stress: financial worry is one of the worst insecurities any employee can possibly have. This also increases a person’s stress levels. Low wage pay is a reason for financial worries as the person doesn’t get what he worked for. This kind of stress hinders the growth of individual by almost deteriorating their productivity. It also affects their personal lives and relationships. It also creates a barrier in providing materialistic resources to their children regarding the quality of education, etc.

Declining Morale: the employee’s morale got low when their work is not recognized and they are not rewarded as per the efforts put by them to contributes towards the objectives of the company. non-recognition will demotivate the employee, thus the morale will be low and workplace conflicts will be increased.

Impact on performance: the employee will work with his full efficiency if he is happy with the working conditions and the benefits he is getting from his employer, thus if he would not get the fair wages. The work will have suffered; productivity will be low. Employees will perform strategically equivalent to the amount they receive. If the employee will be satisfied his productivity will be far better than the dissatisfied employee.

Low retention rate: the dissatisfied employees are difficult to be retained. The low-performance rate, more absenteeism will move the employees to other options of employment as they would not be willing to work for the company, where are they are not valued.

Low skill set: People with high skill set joins such companies or organization who pay them higher rewards for rendering their skills to the company. thus, the company paying low wages cannot attract the skilled labour force and have to work averagely in this fast moving competitive era.

More force: as the company providing lower wages cannot attract the employees having a high skill set, thus the averaged or low skilled labour can work averagely. So, the company have to acquire a higher number of employees. which actually cost more to the company compared to hiring the skilled employees.

High cost: as the company will have to acquire more labour force, which is not highly skilled it required more cost to spent on their wages, machinery breakdown and more wastage or raw material. Thus the company would be in huge resource drainage.

Low Market image: the employees of the company are dissatisfied, performance is low, productivity is lees and employees will spread negative word of mouth, which will decrease the image of the company in the market in all perspectives.

Conclusion: The impact of the low wages is major on employees and employer both. The employer will not get the desired results and objectives will be suffered. Whereas the life of the employee will be impacted financially, emotionally, socially and psychologically. Thus, the companies paying lower wages have to upgrade their provisions timely to manage the competition in the market.

7 Reasons You Should Pay Your Employees Above-Average Salaries. (2019). Retrieved from https://www.inc.com/john-boitnott/7-reasons-you-should-pay-your-employees-above-average-salaries.html
How Can Salary Influence a Worker's Performance in an Administration? (2019). Retrieved from https://work.chron.com/can-salary-influence-workers-performance-administration-25950.html
How Can Low Wages Affect Employees in an Organization? (2019). Retrieved from https://bizfluent.com/info-8203577-can-wages-affect-employees-organization.html