Background of the organisation
Discuss about the Write about its objectives, goals and basic functions. And of course the purpose and reason of producing this report.
There has been long standing debate regarding the fact that how to enhance the performance of the labourers so as to enhance the production of the intended organisation, business or the economy. Some of the researchers has argued in favour of the efficient wage theory, where as some has argued regarding the minimum wage theory (Katz, 1986). Though most of them are aimed to solve the problem, however, each have their own set of drawbacks too. Australia is one such country, which implemented the minimum wage into their economic framework so as to enhance the productivity of the labourers by providing them incentive to work more, however, the economy is suffering more than previous and looking ways to abolish the same. Contrary to this, Fair Work Commission is aimed to provide range of functions related to the interest of the works (Australia Human Rights Commission, 2016). This report is aimed to discuss the present situation of the labour force with the economic principles and portray how this can be utilised in the case of economy of Singapore. Utilising the economic theories like efficiency wage, pay-performance and others it will provide literary evidence for the same and to implement it provide recommendations as well.
Fair Work Commission is the statutory body of the Australian industrial relations introduced back in 2009 under the Fair Work Act 2009 as the part of the reform to the industrial relations of the Rudd government (Australia Human Rights Commission, 2016).
FWC is a statutory body that looks after the working environment and the labour market of the domestic economy. It abolished the Australian Industrial relations Commission (AIRC) and with the objective to bring in integrated working environment in the Australian economy, FWC came into existence. Its main objective is to regulate the minimum wage and control the disputes take place in the working environment (Lane & Mota. 2016)
Goal of the FWC lies within the attempt to creation of the national system that regulate industrial relations in the nation. It provides each state of the Australia discretion to hand over their industrial relational power to the Commonwealth. Another main goal of the FWC is to determine the national industrial actions and judging the disputes take place in the industrial actions and in workplace in the state (Polycarpou, 2017).
Objectives
FWC is an independent body of the Australian government that regulate and enforce the provisions related to the condition of the employment in the economy, industrial actions, termination of employment, dispute resolution and more important decides the minimum wages of the labours.
This report is aimed to discuss the present situation of the labour force with the economic principles and portray how this can be utilised in the case of economy of Singapore. Utilising the economic theories like efficiency wage, pay-performance and others it will provide literary evidence for the same and to implement it provide recommendations as well.
It has been under long debate how to enhance the performance of the labour force in order face higher amount of productivity of the firm and enhance the overall economic growth of the state. Alfred Marshall with the efficiency wage theory provided a solution to the problem. As per the theory there is a high amount of relation between the performance of the workers and the wage (Lanot, 2016). In case of the higher wage labours prefer to work higher and produce more amount goods and service, whereas, lower wage to the workers can lead to fall in the performance. However, over the period, it can be seen that enhancing the wage rate has rather reducing the performance than providing better performance. As per the Alfred Marshall this kind of trend in the performance of the workers was driven by the higher pay due to the fact that they were getting higher wage than the expected wage that has allowed them enjoy more amount of leisure than working. Efficiency wage model suggest that higher wages will increase the effective level of the performance because there is a positive relationship between the wage and effort (Mendoza, 2015). Incomes through wage will increase and it will provide relatively large amount of impact on the performance of the labours as well. If the relationship between the effort E and effort per worker i is given, then the efficiency wage will be
Ei -= e [Wi/We]
Therefore the effort per worker will be showcased from the above equation by the means of division of Wi and We. If the Wi is internal wage We is external wage, then it is linked with the fact that paying wag Wi, which is below the prevailing rate We, then it can contribute to the employee dissatisfaction leading to fall in the overall performance of the labours (Pashardes et al., 2015). In addition to this, there can be the case of the other negative attitude that will lead to the fall in the loyalty of the employee to the brand and sabotage of the activities leading to higher turnover.
Goals
If the Ei index value is unity, then it can be said that the firm is operating under the efficiency age scenario and if it is lesser than unity, then it can be said that the firm is providing lower wage; whereas, it need to provide higher wage in order to continue its operations. As the real world scenario of the Ei index case of the Dell Singapore and HP Singapore can be considered. Dell Singapore pays their project manager 7.5k per month, whereas HP Singapore project managers are getting 8k (Glassdoor.co.in, 2018). Thus the Ei will be as follows:
Ei = 7.5/8
= 0.93
Considering the Ei of the Dell Singapore, it can be seen that the firm is paying wage to their workers than the efficiency wage making. In order to continue operation, the firm need to provide higher wage to their employees otherwise the firm has to close their operation. In addition to this, it is also true that, if the firm wants to enhance their productivity by 1%, then it need to enhance the wag by .93% that will allow them to operate as per the efficiency wage theory.
Labour supply is highly dependable upon the wage. With the rise in the wage, there will be rise in the labour supply, however, the scenario remain like this until the optimum wage point is gained. Post this position as the wage increases, labour supply starts to fall Yellen, 1995).
Figure 1: backward bending labour supply curve
Source: (Taylor, 2001)
From the figure above, it can be seen that the as the wage in the panel one rises utility of the labours starts to change. Change in the utility can be seen from U1 to U2 and to U3 that represents the higher performance of the workers. As the utility rises, time of the working starts to fall and over the time it starts to decrease gradually with the rise in the wage (Taylor & Taylor, 2011). From the second panel it can be seen that, as the utility grows higher from the rise in the wage rate, labour supply reached higher with a positive slope until ab section. Next to this, with the rise in the wage rate from W2 to W3, there will be gall in labour supply and the curve will become backward bending. From this, it can be said that the performance of the labour and the wage is highly related with the each other (Taylor, 1999). With the rise in the wage rate, there will be fall in the labour supply beyond the efficiency wage making the labour supply curve backward bending.
Functions
There is a strong relationship between the pay and performance. As per the xxx, there is such a wage rate at which the labour market comes at equilibrium where they gets expected wage. Until the equilibrium wage is achieved, there will be rise in the performance as well and, when it comes equilibrium wage, then the performance will be at the zenith. Post this, there will be fall in the performance (Katic et al., 1986). As it can be seen from the figure below, there will be rise in the effort from the labour in between AB stretch and the wage will be rising from W0 to Wn*. Next to this with the rise in the wage rate there will be fall in the effort.
Figure 2: wage effort relation
Source: (Hodgin & Chndra, 2014)
Thus considering the intrinsic motives in the form of the PSM there is a potive relation between the effort and the wage until it reaches to the optimum position and post this the relation starts to become opposite of the AB section. At this section, with rise in the wage, effort falls gradually (Athanassopoulos & Shale, 1997).
Fair Work Commission of Australia is one such institute that watches the minimum wage rate of the state and helps the firm to mitigate the institutional disputes through providing verdicts (Guerrazzi & Sodini, 2018). Australia being one of the first nations around the world to introduce minimum wage, it can be seen that there has been various drawbacks and issues as well. Under the minimum wage principal, it can be observed that the firms in the state are providing higher than the expected wage rate and it has forced the overall labour supply to reduce (Taylor, 2001). With higher actual wage rate, firms are paying higher to the labour which is forcing them to earn higher than their expected rate of wage leading the overall supply of labour to fall because the performance of the labour and productivity is highly associated with each other.
Pay performance and efficiency wage are those rates of interest that determine the performance of the workers. If the firm pays higher than the efficiency rate, then it will reduce the overall performance of the labour and there will be a reduction in the productivity as well. Contrary to this, if the firms prefer to pay lower than the efficiency wage, then it will reduce the overall performance of the labour too because labourers will feel demotivated and there may be case of futile nature of the labours (Goldberg, 2016). Considering the case of the Dell Singapore, it can be seen that if the firm wants to provide higher salary compared to now, then it will reduce the financial performance of the firm let it face grave problems in the operations. On the other hand, if it does not increase the wage, then it will reduce the overall performance of the labourers because they will showcase reluctant nature in their performance in production (Chua et al., 2014).
Aim and objective of the report
Wage plays a dual role that can be seen in the case of the shrinking model. As it can be seen that if the firm operates under such a scenario where the lower wages during the initial days and the salary starts to grow with the experience, then it will affect the performance of the labourers who are operating at lower level. Considering the training and hiring cost it can be seen that adverse selection model will reduce the overall performance of the firm. As the example of the failure of the firm, case of the Lowrys Farm can be considered that failed enhance its market presence under the lower wage rate. In the Singapore market it has been paying the workers lower than the expected wage that has forced them to close their operation in the state Lowrys farm, 2018).
As it can be seen from the above discussion that there has been much amount of requirement of the efficiency in the labour force of the Singapore that will aid the selected organisation to face high amount of growth (Kitagawa et al., 2018). In this respect, efficiency wage theory can be beneficial and wage performance measurement can be beneficial. For this purpose following recommendation can be made for the chosen firm:
- As it can be seen from the analysis of the Dell Singapore, worker performance ratio of the firm is less than 1 when it is compared with the HP Singapore. This highlights that the firm need to provide higher wage in order to enhance the performance of the workers.
- Secondly it has been observed that the enhancing the wage would provide substantial amount of pressure on the financial performance of the state.
- One of the major problem within the working environment of the firm, it can be seen that the firm will face lack in performance of if it does not enhance the wage as soon as possible; otherwise, it can cause misconduct of duty, performance loss as well as futility in the overall performance of the firm.
- Dell Singapore need to trace their efficient point of wage where the performance of the labours can be enhanced and provide better scope for the growth of the business.
- Under the lower expected wage of the Dell Singapore, it is of ultimate importance that the firm will revise their pay scale and provide their employees such wage that can fulfil the organisational goal while completing the operational goal.
Conclusion:
From the above analysis of the performance and wage relation, it can be seen that the firms around the world need to pay such wage that aids them to operate under profit maximisation situation through maximising the performance of the labours. If there is considerable amount of gap between the expected salary and the real salary that the employees are getting, it will reduce the performance of the workers and reduce their productivity as well. In this regard, from the literary evidences it has also been found that, if the firm continues to enhance their wage beyond the effective rate of wage, then it will force the labour supply curve to move backward because under higher wage than the effective wage, supply of the labour will be reduced. In this situation, labours will prefer to work less and enjoy leisure because they will earn such an income that will be higher than their expected income leading to fall in the overall labour supply. As per the condition of the firm of the Singapore, it can be seen that, if the firm need to implement higher wage than their prevailing wage rate, then it will enhance the overall performance of the labours because the firm is paying lower than the effective rate of wage. To conclude it can be stated that there is a strong relation between the wage rate and the performance of the employees and additionally labour supply is also highly associated with the wage rate.
Literature review
Reference:
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Taylor, J. B. (1999). The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European Central Bank. Journal of Monetary Economics, 43(3), 655-679.
Taylor, J., & Taylor, R. (2011). Working hard for more money or working hard to make a difference? Efficiency wages, public service motivation, and effort. Review of Public Personnel Administration, 31(1), 67-86.
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