Introduction
Minimum wage requirements profoundly affect organizations and their operations within a small area or globally. Stagnating wages while inflation increases may be a problem for employers and employees, leaving many to wonder about the value of their workplace. Individuals seek employment to cater to physical, economic, and sociocultural needs. The minimum wage debate poses a challenge to organizations s they need to adapt to changing labor market demands to remain profitable.
Primary Benefit
A minimum wage increase is beneficial to the company in the long term but expensive in the short term. The organization’s operations include many service workers earning near minimum wage. Investing in automated systems would reduce the workforce significantly while remaining relatively indifferent to earlier operations is prudent. As more people switch to online communication, the need for human contact is rapidly decreasing, enabling the company to save in the long term. It would hire higher-earning employees for more significant roles and automate lower-wage duties (Ton, 2019). Therefore, the organization should brace for short-term losses but will likely have significantly lower expenses in the future.
Main Risk
The rising minimum wage would lead to reduced research and development in purchasing machinery and software, boosting automation in the short term. Employers in small and medium-sized companies face a problem when a slight wage increase is put in place as they hire at the minimum wage. A small growth may result in automation to reduce the number of employees with higher wages (Bawden-Davis, 2019). Most of these employees work in fields that do not require specialization, using the McDonaldization model. In this way, increasing a person’s wages would not alter their job requirement as they follow a particular formula. Therefore, as state minimum wage requirements continually increase, the company may opt for pricey automation as a short-term loss for long-term benefits (Holzer, 2022). In this instance, the company would incur losses while some employees would face retrenchment to adapt to changing market conditions.
Conclusion
A rising minimum wage poses a long-term benefit to the company through increased pressure to automate operations. This would enable the organization to suffer short-term low profits and incur lower long-term costs through wages. However, this option is not beneficial to employees as the employer has to reduce wages through retrenchment to lower the pressure incurred from its automation model. The service industry will benefit from automation as a feasible alternative to rising wage requirements.
References
Bawden-Davis, J. (2019). How might a minimum wage increase affect your business? American Express. Web.
Holzer, H. J. (2022). Understanding the impact of automation on workers, jobs, and wages. Brookings. Web.
Ton, Z. (2019). Raising wages is the right thing to do, and doesn’t have to be bad for your bottom line. Harvard Business Review. Web.