Nav: Home

Spotlight on fair wages

June 01, 2016

Aligning minimum wages with fair ('living') wages could generate further positive productivity effects and slash the number of working poor, Australian and British researchers have found.

A new study challenges the common industry position that introducing a national living wage in excess of minimum wage levels would result in an excessive cost burden, significant job losses and no guarantee of future productivity growth.

One of the lead authors Professor Thomas Lange, Associate Dean of Research at Australian Catholic University's Faculty of Law and Business, and counterparts at Middlesex University London and Lincoln University counter this claim, demonstrating that including incentives and behavioural effects to bring minimum and fair ('living') wages into line can have a positive impact on productivity.

Published on Monday 23 May in the British Journal of Management, the study presents robust empirical evidence that the introduction of the national minimum wage in the UK has improved productivity through behavioural incentive effects.

It shows that the impact will be stronger in service sectors where labour input is relatively important and in larger organisations where wage differentials are usually greater.

The study points to the scope for further positive productivity effects if minimum wages were raised to meet fair ('living') wage levels, allied to other management motivational activities.

Professor Lange said the analysis showed that the introduction of the living wage in the UK led to improvements in total factor productivity in all low-paying sectors.

"Our results support suggestions that public policy has not fully realised the potential benefits of a minimum wage. This argument may also apply to the 'living wage' in that managers who are focused on cost-reduction strategies may not grasp potential productivity benefits."

"If individuals perceive their wages to be below their felt-fair level, they will reciprocate with reduced effort. Productivity will remain low as a consequence. Low wage, cost-reduction strategies are counter-productive if discernible productivity growth and a truly innovative economy is the ultimate goal."

Entitled 'The UK national minimum wage's impact on productivity', this is the first study of its kind that provides robust empirical evidence in support of minimum wage-induced productivity enhancements and embraces the introduction of a National Living Wage in April.

The UK National Living Wage is £7.20 an hour ($A13.58). Paid to all workers over the age of 25, it will rise to £9 ($A16.98) an hour by 2020. At the time of the announcement (July 2015), the National Minimum Wage was set at £6.50 ($A12.26) an hour.

Minimum wages in Australia are $17.29 per hour or $656.90 per 38 hour per week before tax.
-end-
Reference

Rizov, M., Croucher, R. and Lange, T. (2016). The UK national minimum wage's impact on productivity. British Journal of Management, Online Version of Record [Early View]: http://onlinelibrary.wiley.com/doi/10.1111/1467-8551.12171/abstract

Bio Note:

A German born economist and applied statistician by training, Professor Thomas Lange serves Australian Catholic University as Tenured Professor of Human Resource Management (HRM) and Organisational Behaviour (OB), Director of the Centre for Sustainable HRM and Well-being, and Associate Dean (Research) at the Faculty of Law and Business. He also holds a tenured professorial Chair in Economics and International Management at Middlesex University Business School, London, UK. His previous leadership positions included Research Dean, Executive Dean and Pro Vice Chancellor in the United Kingdom, New Zealand and Australia.

An alumnus of the London School of Economics and Political Science (LSE), Professor Lange is a global authority in the empirical Human Resources and Organisational Behaviour research arena. His work has featured in some of the world's leading business and management journals. He initiated, led and managed externally funded research and consultancy projects to the value of over $A6 million.

Professor Lange served several governments as Specialist Advisor. His research-informed policy proposals were debated publicly during parliamentary sessions in the UK and his academic work has been covered widely by international press and media outlets. His influential scholarship informed, amongst others, the policy work of the World Bank, ILO, OECD, European Commission, the United Nations, and New Zealand's Mayors Taskforce for Jobs.

Media Contact: Jen Rosenberg, +61 407 845 634, jen.rosenberg@acu.edu.au

Australian Catholic University

Related Productivity Articles:

Char application restores soil carbon and productivity
After two years of char application, researchers find increased soil Carbon, magnesium, and sodium concentrations.
Study compares funding, research productivity for 2 diseases
This study compared federal and foundation research funding for sickle cell disease and cystic fibrosis and investigated whether funding was associated with differences in drug development and research productivity.
Biometric devices help pinpoint factory workers' emotions and productivity
Happiness, as measured by a wearable biometric device, was closely related to productivity among a group of factory workers in Laos, reveals a recent study.
Evolutionary diversity is associated with Amazon forest productivity
An international team of researchers have revealed for the first time that Amazon forests with the greatest evolutionary diversity are the most productive.
New report says accelerating global agricultural productivity growth is critical
The 2019 Global Agricultural Productivity Report, released today by Virginia Tech's College of Agriculture and Life Sciences, shows agricultural productivity growth -- increasing output of crops and livestock with existing or fewer inputs -- is growing globally at an average annual rate of 1.63%.
Private property, not productivity, precipitated Neolithic agricultural revolution
The Neolithic Agricultural Revolution is one of the most thoroughly-studied episodes in prehistory.
Erectile dysfunction associated with lower work productivity in men
Erectile dysfunction (ED) was linked with loss of work productivity and with lower health-related quality of life in an International Journal of Clinical Practice study of more than 52,000 men from eight countries.
Impact of acne relapses on quality of life and productivity
In a study of teenagers and adults suffering from acne who consulted their dermatologist, the acne relapse rate was 44 percent (39.9 percent of ≤20-year-olds and 53.3 percent of >20-year-olds).
Fire air pollution weakens forest productivity
Fire impacts on global carbon cycle. The damage to ecosystem productivity not only occurs in fire regimes, but also over the downwind areas through long-range transport of air pollution.
Loss of work productivity in a warming world
Heat stress affects the health of workers and reduces the work productivity by changing the ambient working environment thus leading to economic losses.
More Productivity News and Productivity Current Events

Trending Science News

Current Coronavirus (COVID-19) News

Top Science Podcasts

We have hand picked the top science podcasts of 2020.
Now Playing: TED Radio Hour

Listen Again: The Power Of Spaces
How do spaces shape the human experience? In what ways do our rooms, homes, and buildings give us meaning and purpose? This hour, TED speakers explore the power of the spaces we make and inhabit. Guests include architect Michael Murphy, musician David Byrne, artist Es Devlin, and architect Siamak Hariri.
Now Playing: Science for the People

#576 Science Communication in Creative Places
When you think of science communication, you might think of TED talks or museum talks or video talks, or... people giving lectures. It's a lot of people talking. But there's more to sci comm than that. This week host Bethany Brookshire talks to three people who have looked at science communication in places you might not expect it. We'll speak with Mauna Dasari, a graduate student at Notre Dame, about making mammals into a March Madness match. We'll talk with Sarah Garner, director of the Pathologists Assistant Program at Tulane University School of Medicine, who takes pathology instruction out of...
Now Playing: Radiolab

What If?
There's plenty of speculation about what Donald Trump might do in the wake of the election. Would he dispute the results if he loses? Would he simply refuse to leave office, or even try to use the military to maintain control? Last summer, Rosa Brooks got together a team of experts and political operatives from both sides of the aisle to ask a slightly different question. Rather than arguing about whether he'd do those things, they dug into what exactly would happen if he did. Part war game part choose your own adventure, Rosa's Transition Integrity Project doesn't give us any predictions, and it isn't a referendum on Trump. Instead, it's a deeply illuminating stress test on our laws, our institutions, and on the commitment to democracy written into the constitution. This episode was reported by Bethel Habte, with help from Tracie Hunte, and produced by Bethel Habte. Jeremy Bloom provided original music. Support Radiolab by becoming a member today at Radiolab.org/donate.     You can read The Transition Integrity Project's report here.