Good Case Study On Labor, Output And Productivity
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I personally live outside of US. For example I will use Glenn Allen town in Fayette County Alabama.
US have a regulation regarding minimum wage. As of 2009, US $ 7.25 is the minimum wage, and all employer should agree to pay that minimum ammount. However, many still receive a lower wages than regulated (“Characteristics of Minimum,” 2013).
Leaving 2009, living costs might never be the same anymore. In Glenn Allen town, a single person would normally spend US $7.42 (in an hourly rate). However, the minimum hourly wage itself is US $ 7.25. It might be a small difference, but it would burden people to live normally.
A raise in minimum wage would better the quality of life for the citizen (Roback, 1982, p.1257). The government should look deeper when creating a regulation regarding minimum wages so that less people would fall into the poverty category.
Labor, Output and Productivity
Output has been long defined as a measurement to analyze the productivity, in which it is closely related with productivity (Landmann, 2004, p.3). Meanwhile, Liker (2004, p. 225) considered productivity as the consistency of the company to satisfy the customer demand and managing its resources. Either way, high productivity and output is what almost every company would desire.
While nowadays companies are trying to achieve higher output through giving out higher salaries (Landmann, 2004, p.3; Steindel and Stiroh, 2001, p.25). However, Henry Ford has been doing the other way around. In Ford's way (also known as Fordism), he made people work hard even to the fullest, and then they will get paid high. Fordism is a tool to increase labor productivity using an assembly line to create a bulk/mass production system (Edwards, 1979, pp.112-113 as cited in Prujit, 2000, p.2).
Fordism can be one of the example when we study about output, because back then, producing a car could took weeks to month, while in Fordism, a car could be built in a mere 1,5 hours. A low output rate led to a higher cost which also led to higher product price. Cars were exclussively built for high-class citizens, while after Fordism, cars were built for a wider range of class. And with the low cost of Fordism application, Ford could receive higher revenue and could pay his employees higher. People would be willing to work for Ford as they were well compensated.
Ford also broke down a whole system into the smallest particles and tasks he could, resulting in an easier assembly, and to some extent, Ford never need a specialist in their working environment as every people could do that simplest thing (Pollert, Gilbert and Burrows, 1992, pp.13-17), and thus productivity increased.
Another system to increase productivity and output is Lean Manufacturing also known as Toyota Production System (Liker, 2006, p.33). In Lean, we eliminate wastes in a production process. Wastes are activities considered as non-added value, whereas the activity does not give any additional value in customer's perception.
In Lean, there are 8 wastes to be eliminated, they are: overproduction, waiting, transportation, overporcessing, excess inventory, unecessary movement, defects and unused employee creativity. Toyota believes that by reducing and eliminated the wastes, they can increase the labor productivity and process output.
As a conclusion, investment on wages or salary does increase the productivity but not on a high impact, however we should also understand about the living needs of the employees as when wages are too low, productivity would also go low (Doms and Jensen, 1998, p.239).
System is very crucial when we want to have a higher output and productivity from our labor, because a good system might lead into an easier job desk, hence the workers could work easier and produce more.
Regarding the US regulation about the raise of living wage, it is nothing but to help the living needs of citizen and would give no impact to output and productivity. And as it is also a regulation, the labor would see it as mandatory, not as their request to do better. However as it is a regulation, we should comply to it. Additionally, we can also improve the company image in the employee's eyes as we care about their wellbeings resulting in a lower turnover rate (Bartel and Borjas, 1981, p. 66), thus raising the minimum wages and complying to the government's regulations is highly recommended for organizations.
Bartel, A., & Borjas, G. (1981). Wage Growth and Job Turnover: An Empirical Analysis. In S. Rosen (Ed.), Studies in Labor Markets (pp. 65-90). Chicago: University of Chicago Press.
Characteristics of Minimum Wage Workers, 2013. (2013, March 1). BLS Reports.
Cushman, David O. "The effects of real wages and labor productivity on foreign direct investment." Southern economic journal (1987): 174-185.
Liker, Jeffrey K., and David Meier. The Toyota Way Fieldbook: A Practical Guide for Implementing Toyota's 4Ps. New York: McGraw-Hill, 2006. Print.
Landmann, Oliver. "Employment, productivity and output growth." Employment Strategy Papers 17 (2004).
Mebratie, Anagaw Derseh. "Foreign Direct Investment and Labour Productivity in South Africa'." Research Paper, Institute of Social Studies, The Hague (2010).
Pollert, Anna, Nigel Gilbert, and Roger Burrows. Fordism and flexibility: divisions and change. Macmillan, 1992.
Prujit, H, 2000. Repainting, Modifying, Smashing Taylorism. Journal of Organizational Change Management, [Online]. 13(5), 1-12. Available at: http://m.truty.org/PDFs/Management/RepaintingModifyingSmashingTaylorism.pdf [Accessed 9 December 2014].
Steindel, Charles, and Kevin J. Stiroh. Productivity: What is it, and why do we care about it?. No. 122. Federal Reserve Bank of New York, 2001.
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