Thursday, 5 December 2013

Minimum Wage vs. Minimum VIABLE Wage

Yesterday President Obama gave a speech encouraging the raising the minimum wage. People have a difficult time living on minimum wage in the USA. However this is the wrong, or suboptimised, discussion. The minimum wage is simply the least amount of money that an employer may pay a worker according to law. The actual minimum wage is whatever a worker is willing to accept, taking into account the possibility of off-the-books benefits, under-the-table cash (i.e. tax free payments), illegal employment status of the worker or simply desperation on the part of the employee. There is very little that is edifying about the discussion of a minimum wage, what we need is discussion of a minimum VIABLE wage.

What is a minimum viable wage? It is the lowest wage that is in the best interest of all stakeholders including employee, customer, employee, and the environment. Anyone who has tried to manage a business that involves more than a couple of steps in the service-delivery chain using the lowest cost labor has realized that you get what you pay for, or less. Low quality, high turnover, late deliveries, lack of continuous improvement erode the bottom-line far more than the savings from labor cost. This is not viable.

People who are not paid a viable wage do not come to work with a sense of security, much less a sense of motivation or commitment to their employer and larger team. Customers served by minimum legal wage employees receive service that is proportional to the level of engagement, motivation and professionalism that $8-$15/hour will buy.

In minimum wage environments, the company culture tends to become fraught with mistrust, fear, disrespect for low-status individuals, lack of human development, inability to use minds to find innovative solutions, and other contributors to stagnation and decline.

What we need is a national conversation on a minimum viable wage. It requires collaboration. It requires long-term thinking. It requires understanding of total cost. It requires real leaders. Mr. Obama, 24 months should be plenty of time if you find can gather the right team of rivals to shepherd this discussion.

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