A Discussion on Performance-Based Pay and Minimum Wage (Essay Sample)

A DISCUSSION ON PERFORMANCE-BASED PAY AND MINIMUM WAGE
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A Discussion on Performance-Based Pay and Minimum Wage
Performance-based compensation ties labor expenses to the contributions of the employees to a company. The correlation between employee productivity measured by some customized metric to their compensation is a concept of discourse in the country. Moreover, critics of the performance-based pay policy recommend minimum wage for low-labor jobs explaining that some companies may take advantage of performance-based pay, especially in the formulation of job-specific key performance indicators, and may result in a stressful work environment. This essay highlights the two compensation concepts and the consequences of their application in reality while analyzing whether the government should abolish minimum wage.
It is evident that the idea, even when tweaked to resemble a novel concept, usually leads to frustrations and disagreements between the employee and employer. Instead of motivating employees, incentive-based pay structures usually bear adverse consequences. A Human Resources Management study found that workers who receive performance-based pay tied to either the performance of the organization or the individual productivity work harder but also experience a lot of work-related stress and exhibit increased anxiety levels (Ogbonnaya, Daniels, & Nielsen, 2017). Performance-based pay impacts a negative effect on job satisfaction. For performance-based compensation, the pressure of working too hard and the stress anxiety related to work negates the gains that the company may reap in productivity (Dahl & Pierce, 2020).
Furthermore, although employers may think that incentive-based pay promotes an overall positive attitude towards work, studies have proven that this compensation structure lowers the rate of employee retention, decreases morale towards work, and stagnates salaries. It also stresses relationships between employee and employer, making the staff feel exploited by the company and brings about the gradual deterioration of employees' mental health (Dahl, & Pierce, 2020). For instance, in 2019, the teachers of Denver protested the performance-based pay policy adopted to their pay (Turkewitz & Goldstein, 2019). The pay-for-performance model pegged the bonuses of teachers on student performance and affinity to take on challenging work. According to Turkewitz and Goldstein (2019), the abstruse structure of the key performance indicators classified challenging work as teaching in schools where most students are from low-income families. The model has been criticized by educators as exploitative since it delivers erratic bonuses but stagnates base salaries and fails to correlate the wages with rising costs of living.
On the other hand, minimum wage provides employees with reasonable compensation for humane living conditions and protects low-labor employees from exploitation by companies. According to an article in the New York Times (Wezerek, 2021), unregulated or unrevised minimum wage causes workers to supplement earnings to afford meals, insurance, and catering for utility bills. Many households face a deficit of hundreds of dollars on basic living expenses every month due to low minimum wage or instituted minimum wage ((Wezerek, 2021)). Still, the federal government has recognized the issue, and the Biden administration has proposed a phased increase of the federal minimum wage from $7.25 to $15 per hour. The proposal tabled by democrats in congress will fully implement the new minimum wage policy by 2025.
While in some states, 50 percent of the workers will benefit from the proposed law, critics posit that a new minimum wage of $15 will lead to a loss of jobs via layoffs as companies will seek to automate production processes. The estimated number for the job loss caused by the $15 minimum wage raise is at 1.4 million jobs by 2025 (Wezerek, 2021). Still, according to Wezerek (2021), other studies have demonstrated that minimum wage increases employment. In the article, Wezerek (2021) refers to an aggregated result of 11 meta-analysis studies into the matter that depicts a zero-shift effect on low-wage employment caused by the increase of minimum wage. Furthermore, despite criticism that inflation will render ineffective the increase of minimum wage on low-wage workers, the Congressional Budget Office has demonstrated that the increase of minimum wage will raise the income of millions of people above the national poverty level by its implementation deadline 2025 (Gottfried, 2021).
To sum up, performance-based pay may prove efficacious in instituting a productive environment for skilled labor. Still, its effects are short-term as employees start to get frustrated with stress and the pressure of ensuring an overall high performance for the company. In some cases, the incentive-based pay decreases employee retention rates and creates a work environment of dissatisfied employees wi