Studies of Economic Change

Low Wages

Reverse to the positive feedback of high wages low wages induce the lethargy of the management. The optimising of the company processes can be replaced by sloppiness and a lack of planning because extra work does nearly costs anything. And low wages can compensate sloppiness and a lack of planning. Low wages personal disrespect demotivate employees. The management reacts to this with an authoritarian leadership which destroys any remaining intrinsic motivation. It is expected that the company processes are organised in a way that unqualified and uneducated people can do the work. Low wages are the criteria for hiring the workforce.

The result is that companies do not have to take care about the education and training of the workforce. Pupils at lower secondary modern schools do not have any incentives to try hard because they have nearly no chances for a promotion anymore. On the other hand the management has to be "improved" to fix the company schedules in every detail and to sustain sanctions to the workforce. In this way a so called "elite" arises. This elite separates themselves from the common people more and more. Consequently the society is divided into the rich and the poor, the support of a small so called "elite" and the neglect of the majority.

But you cannot expect any initiative from demotivated and low-paid employees. This leads to lower quality standards and to a setback of the scientific and technological development. A substantial competitive advantage is getting lost.

Unproductive processes have to be compensated by an increase of the hours worked and a reduction of the wages. This might lead to full employment at the best but also to repressions and sanctions against the workforce. Wage reductions and the lack of international competitiveness cause the reduction of public revenues.

This leads to a "positive" feedback:

The consequences of low wages are low wages and poverty at the best connected with full employment.

This is equal to the regression phase of the economic life cycle as the former industrialised countries are about to be overtaken by the developing countries in a while. There the wages increase steadily. Here the downward spiral accelerates:

The downfall of developed cultures is on the way if the trust of the common people is gambled away.

Low wages to make short-term profits is at the expense of optimising profits in the long-term. Purchasers of company who act like this are called corporate raiders rightly.