Rising wages - good and bad...

How much should you get paid for what you do?

Rising wages has good and bad aspects and herein lies the issues for all workers [see photo].

Rising wages comes from labour shortages not from inflation - that is the first fact you and I should acknowledge. Of course as wages rise so do prices for goods and services thus we enter a cycle of workers' pay chasing the cost of living. This is a closed loop that generates entropy not progress. As employees chase wage increases they become less selective about the jobs they take. In quick time they move into areas of work which they are less motivated to perform well and have few viable skills to bring to their new workspace. But... if these facts affect their performance in ways that threaten their long-term employment they simply apply for a another job with a higher wage and benefits. These folks "fail upwards".

The good that comes from "wage rise" restructures is that a lot of waste is driven from the labour market. The first sign that this is occurring is that systems begin to get priority over labour. This means that the system [processes] become the focal point of each entity not the talent [labour inputs]. Rapid wage rises tend to lead us to "over-price" labour. The bad that comes from rising wage bills is that more and more businesses fail due to cashflow issues. For example businesses face rising costs of labour at the same time they must cope with falling or subdued demand for products and services. Falling demand comes from a broad spectrum of drivers but one that is almost universal is that consumers find substitutes for what they relied upon as stables in the past.

A critical issue ahead for all who seek a living wage is that many businesses [and most public entities] are way too labour intensive and in times of rising wage bills these flaws become critical factors for success or failure. In times of rising wages it is important that labour is used to generate top-line revenue but too often this is far from the case because too many people hold jobs that are a cost not a benefit in this regard.

Richard.