Wages
Regarding the three factors of production, land, labor and capital, the economists classify three diverse types of payments. Hence, payment received by the owner of the land is called rent, for the capital is interest, and for the labor is wage (Boyes & Melvin, 2008, p. 10).
First, it is important to state that in spite of the fact that wages and salaries bring the same sense of compensation, the International Labor Organization (ILO) makes a difference between them for managerial purposes. Hence, wage is the term used to express the remuneration given to blue-collar employees, for hourly, daily, or fortnightly services; while salary is considered as the pay given to white-collar employees who are hired under an annual or yearly basis. Nevertheless, labor market flexibility, which is one the most relevant characteristics of the neoliberal age, makes this difference to be unnecessary, since human beings are considered as resources, both types of employees are treated indistinctly. (Anbuvelan, 2005, p. 169)
Basically, wages are got according to the natural forces of labor supply and labor demand. In equilibrium, it is supposed that employees should receive fair wages according to the contribution to the economy’s production of goods and services (Mankiw, 2015, p. 392). It is to say, like all markets, the forces of supply and demand determine equilibrium. Supply of labor is determined by workers and demand by the companies, so that, without intervention by governments, the salary will be adjusted until the level of employment equilibrium and the wage equilibrium is reached. Nevertheless, the government establishes a minimum wage so as to guarantee workers a minimally adequate standard of living (Boyes & Melvin, 2008, p. 172).
Human Capital and Wages Relationship
Reliable literature has demonstrated the positive relationship between human capital in terms of education and on-the-job training. Psacharopoulos and Patrinos (2004), found that investment in education acts very similarly to the investment in physical capital; in the same way, they could find some evidences to state that there is an 10% increase in salaries for each new year of schooling. In addition, there is plenty of literature in economics to conclude that there is a raise of around 8% in employees’ salaries for every year of schooling (Mankiw, 1995, p. 294). As a result, investment on human capital creates a differential that is observed in an increase of the skilled labor over the unskilled one. The differential is clearly explained in the following graph:
Source: (Boyes & Melvin, 2013, p. 647)
This graph can be explained as the differential in demand and supply between both markets, skilled and unskilled. The skilled market gets a differential, that is denoted in an increase of 7-dollar wage. It happens because the supply of skilled labor in (a) is smaller than the demand. Then the equilibrium differential between (a) and (b) is the represents the return to the human capital investment.
Job Satisfaction
Job satisfaction has many relevant aspects. As satisfaction represents a result of work experience, high levels of dissatisfaction help organizations focus on issues that need attention. In fact, when organizations deal with job satisfaction, they must understand that the concept expresses a mixture of feelings, either positive or negative, employees have about their jobs, it means that it is has to be with perceptions and behaviors that employees exhibit at work (Davis & Nestrom, 1985, p. 109).
Different levels of perceptions about their jobs can vary from extreme satisfaction to extreme dissatisfaction. There are attitudes, also called factors, in which researchers measure the satisfaction. These factors are: satisfaction with the work itself, satisfaction with pay, satisfaction with fellow workers, satisfaction with supervision, and satisfaction with promotions (Dailey, 2003, p. 21).
- Satisfaction with the work itself has to do with the way the work has been physically and psychologically designed; work is the real purpose of any organization. Employees spend almost half of their lives at the workplace; then, they claim for comfortable and satisfying conditions to live, develop, grow, and train. It also involves a careful analysis of schedules and clear work task designs. When employees find well designed and challenging jobs there are less probabilities for them to feel demotivated and bored (Kondalkar, 2007, p. 192).
- Satisfaction with fellow workers is a representation of the life itself, people are always in search of honest relationships in terms of respect, trust and an authentic friendship. Nevertheless, previous research has proven that sharing the workplace with cooperative and friendly colleagues does not improve either satisfaction or work performance, yet it has demonstrated that the contrary condition would negatively impact the level of satisfaction and the performance at work (Luthans, 2011, p. 143).
- Satisfaction with supervision is nothing but the synergy resulted from the employee-leader relationship. A good leader basically makes followers feel satisfied, through innovative leadership and the support to provide guidance, advice, preparation, training, direction and impulse to help them get rewards and feel satisfied. Then, modern leaders should understand the importance of involving employees in some participative decision-making processes (Dailey, 2003, p. 33).
- Satisfaction with promotions deals with the career opportunities offered by organizations for personal and professional development. People must feel that within the organization there are conditions that will allow them to make progress, those opportunities are within their reach, and they only need effort and dedication. However, promotions at work do not all exhibit the same level of satisfaction; for instance, when the promotion is given as result of the seniority, it demonstrates less level of satisfaction than promotions that are obtained as a result of job performance. Similarly, low salary raise in promotions does not represent a significant level of satisfaction as those promotion with high salaries (Luthans, 2011, p. 142).
Wages and Job Satisfaction relationship
The last attitude involved in job satisfaction is the satisfaction with pay such as salary, benefits and incentives which reflect recognition for the efforts at the workplace. Money received by employees not only happens to be a valuable resource to satisfy their needs, but also embodies an influential asset to enhance the level of their satisfaction. This expectation reflects the need of people to be valued, rewarded, and recognized. This perception represents a positive reinforcement to motivate employees to feel comfortable with their work, consequently, motivated employees result on a better performance (Luthans, 2011, p. 142). Just a Warning, it is important to highlight that the rewards in organizations, that can emerge in form of wages, are linked to the compensation system when they are extrinsic, or to the task design when they are intrinsic. A perception of unfairness or inequality of rewards may unbalance the equilibrium (Dailey, 2003, p. 35), then, the levels of satisfaction could decrease and affect performance negatively.
Performance
It is the way in which people fulfill their functions, tasks and responsibilities. It is an individual behavior that affects the collective, consequently, this affects the organization. It is assumed that an outstanding performance eases the success of the organization. Previously, performance was limited to the assessment of how the employee performed their tasks, but nowadays, this concept has been broadened to examine citizenship, it is to say, the actions that help improve the climate at work, such as helping coworkers, committing with the organizational aims, respecting colleagues, among others; and the counterproductivity, which is the contrary of citizenship, in other words, all the actions that may impact the climate negatively, such as stealing, destroying company property, behaving aggressively, among others (Robbins & Judge, 2013, p. 555).
Job Satisfaction and Performance Relationship
One of the objectives for organization to measure job satisfaction is understanding how to motivate employees to increase their performance. The aim of this section is to present some evidences of the relationship between job satisfaction and performance. It has been demonstrated, in 312 studies revisions, the existence of a strong correlation between job satisfaction and performance (Judge, et al., 2001, p. 376). In addition to this, one study conducted in 116 seafaring officers, in which the obtained data were analyzed using structural equation modelling, found a strong correlation between job satisfaction and performance (Yuen, et al., 2018, p. 1).
Conclusions
There is wide literature that demonstrates the relationship between externalities and performance, what can be observed as a positive spillover exported by developed nations into developing countries.
When organizations train on-the-job, and qualify, let or make their employees qualify on their own, are not only gaining human capital for productivity purposes, but also empowering employees in such a way that they can obtain better promotion possibilities that end up having repercussions in wage raises. In this technological age, the sharing of knowledge has been one of the benefits obtained by societies because of globalization and the neoliberal model.
As a result of the investment on human capital, employees have enhanced their recognition in the labor market, what directly has positively impacted their wages, and subsequently, their job satisfaction in terms of satisfaction in pay. This positive indicator of satisfaction contributes to improve the level of motivation to impact performance positively at work.
References
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