Ethical to Double Pay Rates

Queston: Discuss about the Ethical to Double Pay Rates. Answer: Introduction Whether it is ethical or not cut double pays require us to look beyond the action itself and to the aftermath of the implementation of the recommendation. In similar fashion, the decision by the Fair Work Commission to recommend the cutting of double pay on the weekends in Australia raises a myriad of issues. The commission has cited various reasons for this move. First, it would increase the working hours and second, the availability if services during this period. Some employers have lauded this move saying that it is an opportunity for them to hire more employees over the weekend. Regardless, stakeholders in some quarters have expressed that there are certain aspects of the cut the makes it unethical. For instance, it simply means that people whose pay has been cut will have to work more hours, work longer shifts to make up for the lost income. To establish whether or not the move is ethical, various articles that covered a couple of studies were a review. First, the study, Race against Time: Extended hours in Australia that outlines some of the causes and effects of long working hours. It is common knowledge that having people working for longer than the stipulated number of hours places them dangerously at serious harm. Second, Do Workers Feel Entitled to High Wages? Evidence from a Field Experiment, that outlined the relationship between wage changes and reciprocal behavior ie is there a correlation between the changes in wage and the amount of effort an employee puts into work? And if there is, what impact does it have on the employee and is there an ethical linkage to it? Lastly the article Do wage cuts damage work morale? Evidence from a natural field experiment was used to provide more insight into the core issue of this paper by providing input from a slightly different point of view. One of the major effects of long working hour falls into the major categories of health and work safety, and coherence in familial and communal family relations (Peetz et al., 2003). Even more, it is the wish of many employees that they worked for a shorter number of hours. Cutting pay rates is unethical as it leads to overwork that constitutes a reduction in social productive leisure thereby putting restrictions on the amount of time available for being effective in marriage, parenthood and citizenship (Peetz et al., 2003). Further, working for long hours goes in the way of having more time that is essential for revitalizing and recuperating, not forgetting to have more time for involvement in civic and community work and learning new skills (Peetz et al., 2003). The article Race against Time: Extended hours in Australia covers, or rather reports on the issue of prolonged working hours and overwork that was put to test by the use of a workplace survey data. The main concepts that were being investigated are as stated above: Causes and effects of long working hours. Strengths and weaknesses One of the major weaknesses of the concept of long working hours regarded as an unethical consequence of pay cuts is, the notion could be overly misleading in that, there are other aspects that play a huge role in determining the number of hours that employees put into work as Peetz et al., (2003) puts across. It, therefore, weakens the link between, pay cuts and ethics. One of these is there are employees that work the long hours at the rates provided for by the full overtime-agreed rates, thereby employees being the drivers of what is thought to be a scenario driven by the employees. Another factor pushing employees to work longer hours as seen from an in-depth evaluation of the concepts at the center of the article is a failure to working long hours piles pressure on the employees since most tasks are left pending leading to carrying forward work from the previous day. However, the concepts put across by the article play some significant role in establishing whether cutting The Double Pay Rates on the Weekends in Australia contributes to long working hours, a factor that is regarded unethical in some quarters. The study concretely established that long working hours directly resulted in more work-related injuries and rates of illnesses among the employees. Moreover, the study outlined in the article also established the link between long working hours and the impact of their personal lives. Also, in as much as some employees might have some say in the number of hours they could work and the start and finish time of most of their shift, a link is established between the facts leading to working for long hours and the inability to have say on the aforementioned hence justifying the fact that cutting the rates of pay was in fact unethical. The article outlined a few findings that more often than not pointed to the unethical nature of pay cuts. Firstly, long hours, a consequence of pay cuts, leads to increased pressure on the employees, leaving work late, taking work home, feeling work is piling up while they're away Peetz et al., (2003). Secondly, long working hours increased the rate of occurrence of injury and illnesses. Thirdly, the study established that pay cuts generally damages workplace culture between the various personnel in the place of work. changes such as pay cuts are instrumental in reshaping employees' point of views in that, they willingly align themselves with the organizations objectives hence voluntarily work long hours, or do it to compensate for the reduced wages. The other aspect of pay rates that could try to establish whether the action is ethical or not is in relation to the effect that wage changes have on reciprocal behavior i.e. A workers propensity to reciprocate a wage perceived as fair with a commensurate level of effort (Chemin Kurmann 2014). The main concept applied in the article is the Downward Wage Rigidity put forth under the title of partial gift exchange by Solow and fair wage hypothesis by Akerlof (Chemin Kurmann 2014). Further, based on the above concept, the article seeks to relate firms unwillingness to cut wages and linking to reciprocity that is then applied to the core issue of this paper. The idea of ethical considerations before cutting down on the wages is also outlined in the above study. There is need to respect the ethical principle of no breach of promise and beneficence. Primarily, workers were followed for a 12 week period in a bid to estimate the effects of pay cuts and pay increases. Despite the fact that the Australian scenario does not breach the aforementioned principles, no respect is accorded to the affected employees- full-time, part-time and casual- since their input is not considered. Further, no justification whatsoever was given in support to the pay cuts. This, as Chemin and Kurmann (2014) attests is unethical. Moreover, the pay-cuts put workers in an awkward situation, according to the DWR phenomenon: ...resistance to paying reduction comes primarily from employers, not from workers or their representatives, though it is the anticipation of negative employee reactions that makes employers oppose pay cutting. The claim that wage rigidity gives rise to unexploited gains from trade is invalid because a business would lose more money from the adverse effects of cutting pay than it would gain from lower wages and salaries (Chemin Kurmann 2014). Strength and weaknesses The strength of the concept is it puts into consideration ethical factors such as beneficence and breach of promise into the whole idea of reciprocity. Again, the subjects in the study were subjected to large enough wage differences to enable detection of any changes. Further, the study covered had high statistical power due to the heterogeneity of data obtained through varied treatments of employees. More, a majority of those which were regarded as limiting factors methods were put in place to ensure that any inconsistency was eliminated. For example, in a bid to curb unobserved seasonality that occurred during the same period as wage cuts The weaknesses to the concept applied include: chances are there was bias with the identification of the effects of wage fluctuations since these could not be account for with time changes. The study took a longer period, therefore, changes are alterations in the macroeconomic environments and holidays were more than capable of having adverse effe cts on work performances during the period of wage reduction. Additionally, the sample size was relatively small to establish any significant changes whenever there was a wage cut. The findings outlined in the article, Do Workers Feel Entitled to High Wages? Evidence from a Field Experiment, are as follows: firstly, there was a quick adaptation by workers of the fair wage reference to a relatively high level responding to increase in pay, hence positively influencing the amount of effort by the employee in relation to the pay offered. Secondly, there was a generally negative reaction to paying cuts despite the new wages being relatively higher than what was offered in the market at the time. The wage changes basically affects worker reciprocity- where the effort an employee puts at work is directly proportion to their wage as compared to that which is considered fair in relation to their wage reference- therefore, it would be in order to say that the pay cuts during the weekends in Australia would definitely have adverse effects on the employer too. Considering that the decision does not emanate from the employer, it is unethical that the union is making a deci sion that affects a large pool of stakeholders without allowing them to weigh in on the issue. The study is about the effects of wage cuts on employee morale and overall productivity. Ideally, when there is high work morale amongst the employees, they can work with minimal supervision and this leads to an increase in productivity. From the results, wage cuts had a huge effect on the productivity decreasing the overall output by almost 20%. However, the research also found out that high wages did not increase productivity (Kube, Marechal Pupe, 2013). The models used in this research are the model of reciprocity and the model of inequality aversion. The model of equality aversion faces challenges when trying to balance between the maximization of their income as well as the equality in income distributions. By using the standard laboratory exchange game, it is highly likely that a workers payoff can exceed the employers payoff (Kube, Marechal Pupe, 2013). However, exerting costly effort makes workers increase the payoff of the employer thus reducing inequalities. This means that if workers become sufficiently inequality averse, then higher wages will lead to the higher effort while working. It is also true that a workers payoff is always lower than the firms payoff. Therefore, an inequality-averse worker will; choose to use minimal effort in their work irrespective of the actual wages (Kube, Marechal Pupe, 2013). The reciprocity model, model is in line with the explanations from the study. The assumptions of the model are that the workers will always choose minimal effort because costly effort always results in reduced workers payoff while increasing the firms payoff. Both of these are responsible for the decrease in the overall workers utility (Kube, Marechal Pupe, 2013). A pay cut is always considered as an unkind action and a pay increase as a kind action. From the above assumptions, it is therefore highly likely that workers in the reciprocity model will engage with other firms that are more ahead in their pay-offs. Strengths and the weaknesses While the study only uses action-based reciprocity models in the gift-exchange field, additional information needs to be researched on the other models. In addition, the study does not provide the specific effort costs for the workers and perceptions of the output value. This is because output value could be induced or elicited. Further studies are needed to examine the determinants of the emotional state of workers as the study does not provide how wage cuts and increases affect the workers mentally and therefore have an effect on the output. For example, during periods such as recessions, the perception of workers might change as compared to other times. This is because they are likely to understand that wage cuts are necessary for the company to remain operational on weekends and for longer periods. Also, the study does not provide an insight on how the employees deal with managing their negative reactions and fearing for job loss. Furthermore, research should be conducted to show how self-reflection might mitigate the negative effects of wage cuts. The strength of the research used is in the model used; the reciprocity model. The model is essential as it gives information on how wage cuts lead to a reduction in output and productivity while pay rises had no effect on productivity. Also, the research provides the reasons why the reciprocity model was used instead of the inequality aversion model. Debate and analysis of the findings From the article, it can be seen that wage cuts have negative effects on productivity. However, even though wage cuts damage the morale of workers, there was no evidence that an increase in wages leads to an increase in productivity. This is because wages are not tied to employee performance. The results also reveal that the firm is always ahead of the worker in the payoff and nothing that the worker does will change their payoff. In addition, in the reciprocity models, individuals behave independently to the kind or unkind actions on their wages. In this instance, a pay increase is considered as a kind action while a pay cut is considered an unkind action. As pointed out earlier, there are adverse effects on the employer to considering that the decision does not emanate from the employer (Chemin Kurmann 2014). This is the fact that makes the whole pay cut action unethical since the union is making a decision that affects a large pool of stakeholders without allowing them to weigh i n on the issue. Pay cuts also impact on employee morale. This explains the reason why many organizations do not opt for reducing the wages of their employees, a fact that Chemin Kurmann (2014) asserts pointing out if the losses were weighed, all stakeholders would be negatively affected. Work morale is an essential component in employee work rate which has a direct effect on the overall productivity. This is reinforced by the fact that the study found out that productivity increased with an increase in the morale of the employees (Kube, Marechal Pupe, 2013). The contracts of employees reveal the relationships that exist between them and the employers and this explains why a wage cut damages the relationship between the two parties. In conclusion, there are numerous points of view in trying to establish whether the recommendation by the Australian commission to cut pay is ethical or not. As demonstrated by the reviews above. Some of the arising issues that need keen consideration include, the effects the implementation of the recommendation would have and the impact the recommendation would have on work-related aspects such as morale and reciprocity. References Peetz, D., Townsend, K., Russell, B., Houghton, C. (2003). Race against time: Extended hours in Australia. Australian Bulletin of Labour, 29(2), 126. Chemin, M., Kurmann, A. (2014). Do workers feel entitled to high wages? evidence from a field experiment. Mimeo. Kube, S., Marchal, M. A., Puppe, C. (2013). Do wage cuts damage work morale? Evidence from a natural field experiment. Journal of the European Economic Association, 11(4), 853-870.