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Setting low wages for employees is a common practice used by small businesses and big corporations. The main factors contributing to the implementation of this practice in small businesses are limited resources. In newly opened companies where the labor cost is included in the products final price, affordable prices can attract more customers. Without sufficient demand and financial growth, the companies cannot offer employees favorable working conditions, resulting in high turnover rates. On the other hand, as high turnover brings losses to the business, keeping low wages for employees allows the company to balance the losses. On the contrary, big companies usually compensate low wages through additional payments or bonuses.
Furthermore, there are several negative repercussions of businesses keeping low employee wages. Firstly, the low wages practice harms the employees mental stability, causing stress and increasing their chances to engage in unhealthy behaviors. In addition to harming the local communitys health status, the practice also limits the employees opportunities to overcome poverty and gain financial stability. Lastly, the practice negatively affects the labor market, setting low wages for employees across the specific business industry or local area.
Currently, the low wages practice is controlled by the minimum wage policies. However, the issue is still occurring with undocumented workers and manufacturers who exploit the labor of people from developing countries. Increased governmental control of wages and promotion of more friendly business practices in providing higher salaries for employees will benefit both local communities and businesses. According to Alam et al. (2020), sufficient wages can increase employees motivation and improve overall business productivity. Therefore, instead of utilizing the harmful low wages practice, businesses should pay the workers higher wages to increase their motivation and benefit from improved business productivity.
Reference
Alam, M. N., Hassan, M., Bowyer, D., & Reaz, M. (2020). The effects of wages and welfare facilities on employee productivity: Mediating role of employee work motivation, Australasian Accounting, Business and Finance Journal, 14(4), 2020, 38-60. Web.
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