Employee Motivation and Minimum Wage

Critically discuss which theories of motivation may explain the establishment of a performance reward system with employing organizations

Employee motivation is one of the hardest things for employing organizations to do right. Lack of motivation, stagnation, disillusionment, apathy, and laziness is probably the major banes of most businesses, which rely on their employees’ productivity for success. For that purpose, many companies attempt to set up reward systems, either on their own or by employing third-party advisors.

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However, despite their best efforts, a lot of companies still suffer from inert employees.

Ultimately, a functional reward system requires four major points to be addressed: compensation, benefits, recognition, and appreciation (The Best Ways to Reward Employees 2005). The problem with most businesses is that they often solely depend on the performance reward system. This system generally focuses on monetary motivation and often overlooks recognition and appreciation, seeing money as employees’ main motivation.

However, this is not the case, as play can only motivate an employee for a certain time, and the effect is bound to wear off. From this point onwards the manager can either attempt to increase the pay further, and eventually run the businesses into an unfavorable state, or recognize the faultiness of this system, and attempt to engage the workers in a different way (Chamorro-Premuzic 2013).

To understand why recognition and appreciation are so important, it is needed to discuss them from the perspective of the Maslow Hierarchy of Needs (McLeod 2014). Monetary motivations can only satisfy the basic deficiency needs: physiological, safety, and, to an extent, social. These can be categorized under extrinsic motivation, a desire to earn a reward or avoid punishment (deficiency) (Cherry 2016). However, these needs only motivate workers while they are not achieved. Once they are satisfied, a person may want to move up to the next level of needs: esteem and self-actualization. And these can be only provided through recognition and appreciation.

This kind of motivation is personally rewarding and called intrinsic motivation. Another problem with a pure monetary reward of performance can be found by applying Frederick Herzberg’s two-factor theory to it. Performance reward eliminates hygiene factors, reducing dissatisfaction, but is not a motivator by itself and does not provide satisfaction (Mind Tools Editorial Team n.d).

Critically evaluate the argument for and against the national minimum wage

The minimum wage has numerous arguments both for and against it. A stable minimum wage is beneficial to employers first and foremost because this gives them the freedom to hire workers at low costs, and thus increase profits at their expense. This system is also beneficial to inexperienced workers looking for work experience because they can enter their preferred industry at the minimum wage.

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However, low minimum wages also have disadvantages. Since low-salary and low-recognition jobs are neither intrinsically nor extrinsically motivating, employees are not motivated to put extra effort into their work or to develop job pride. This leads to high turnover, which decreases productivity and increases costs (Swain n.d.).

Increases in minimum wage can have positive motivating effects on the employees and eliminate some of the detrimental hygiene factors. However, the downside is that increasing minimum wages automatically causes loss of jobs, as the businesses are forced to cut their losses and put more regulation on the employees they can hire (Dorfman 2015).

This same situation happened in the United Kingdom when it was announced that minimum wages would be raised from £6.50 to £7.20, which instantly caused the companies to announce that they would be raising prices on their services and decreasing recruitment to accommodate for higher salary expenses (Taylor & Eccles 2015). These fears were confirmed when Office for Budget Responsibility, the country’s independent budget forecaster, estimated a projected loss of 60,000 jobs and a general increase of price on affected businesses services b 1 percent (Holton 2016). So while the minimum wage was raised to bring it close to the living wage (an informal minimal level of pay, needed to lead a decent life), the loss of jobs and increase of prices may have harmed the cause, by leaving many people without any sort of salary.


Chamorro-Premuzic, T 2013, ‘Does Money Really Affect Motivation? A Review of the Research’, Harvard Business Review. Web.

Cherry, K 2016, ‘Differences Between Extrinsic and Intrinsic Motivation’, Verywell. Web.

Dorfman, J 2015, ‘Unions Admit Truth About Minimum Wage And Their Motivation’, Forbes. Web.

Holton, K 2016, ‘Britain’s new minimum wage feeds in to ‘Brexit’ debate’, Reuters. Web.

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Mind Tools Editorial Team n.d., ‘Herzberg’s Motivators and Hygiene Factors’, MindTools. Web.

McLeod, S 2014, ‘Maslow’s Hierarchy of Needs’, Simply Psychology. Web.

Swain, K n.d., ‘How Does Minimum Wage Affect Production?’, Chron. Web.

The Best Ways to Reward Employees 2005. Web.

Taylor, R & Eccles, L 2015, ‘Business bosses warn introducing national minimum wage increase of 70p-an-hour will threaten thousands of jobs around the UK’, MailOnline. Web.

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StudyCorgi. (2021) 'Employee Motivation and Minimum Wage'. 29 April.

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