An article in The Guardian caught my eye, a spokesperson for a company cited in the piece said: workers are less productive as a result of the increased living wage. “One of the problems that we are seeing across industry is people happy with just hitting the minimum targets. When picking fruit in the orchards the staff have the opportunity to earn significantly more money on bonus, based on performance and quality of picking. With the living wage increasing as it has, the staff are now happy with earnings and don’t seem to be as motivated.”
Is he correct?
The Living Wage Foundation say that the living wage is good for business, that it improves the employer brand, boosts staff productivity and motivation at work. Professional services firm KPMG suggests that companies who fail to pay their employees a living wage are harming their own profitability, rather than saving money. They cite a case study where cleaners had their wage increased from the minimum wage to the living wage and the result was significantly lower turnover of staff – saving the company £75,000 a year in recruitment costs.
Money matters
I think the conventional wisdom is that a low wage is likely to lead to a lack of motivation, lower morale and lower levels of productivity. This can also be true for well-paid roles. We tend to judge our remuneration alongside those of others in a similar role. A highly qualified professional is not going to compare their pay to the minimum wage, but to that of their colleagues.
The economic concept of the ‘efficiency wage’ explains that a worker who is paid a relatively higher wage than the market already bears is likely to feel more loyalty to their employer. In addition, they will work harder to maintain their position as they realise they may not get the same money elsewhere.
A higher wage will motivate most workers, and we know that fair compensation can positively influence worker engagement and task performance. A study by Glassdoor found that 45% of employees were motivated to work harder when they received a higher salary. A high salary can also help to reduce stress and financial worries, which can have a positive impact on an employee’s mental health and well-being.
Motivation and meaning
However, I am yet to be convinced that money has a long lasting motivational impact. Indeed, according to Herzberg’s two-factor theory of motivation, money is considered a hygiene factor for employees: money can keep employees satisfied with their jobs, but it doesn’t always motivate them to improve themselves or be creative.
Many factors determine worker morale and productivity, wages are just one of them. Often other factors are more important such as working conditions, management, benefits, and for many workers and professionals meaningful work is important.
Underlining the sentiments expressed in the first paragraph, is the thought once an employee receives adequate remuneration in this case a living wage motivation disappears.
Meaningful work
I’d suggest that most workers don’t prioritise higher earnings above other factors. Workers want trust, social cohesion, and purpose from their work; they want to feel that their contribution is recognised and that their team is collaborative. The best of your people want clear responsibilities and opportunities to learn, develop their skills and grow in their role. They want their personal sense of purpose to align with that of the organisation.
In the 21st century workplace three factors are important to working people:
- We have different motivations at different points in our career and so what represents quality now may not represent quality in ten years’ time;
- Pay is only one aspect in determining quality work; for many people fulfilment, personal development, work life balance or flexibility are just as important;
- We are most likely to enjoy what we do when we have a meaningful say at work.
Talented people want to map a career path with their chosen organisation; they want managers who care for them, listen to them, giving them a voice, and enable development. They want to see how their contribution fits into the bigger organisational picture. Motivation comes from within, it is personal and changes over time.
I think that optimum motivation happens through mindfulness, values, and sense of purpose, rather than through incentives, power and status, guilt or fear of disappointing others. Understanding what does and does not motivate a particular person is key to designing their career plan, securing their engagement and harnessing their commitment and discretionary effort.
I suspect that the reference to people being happy in hitting minimum targets is not about money at all, but the attitude of the employer to the workforce. If you think your workforce is lazy, then probably will be.
