Increasing Minimum Wage and the Effects on Behavior

Since this is an election year, Americans can expect to hear a lot more discussion about minimum wages among other things.  Conservative candidates are mostly against a federal minimum wage increase and Democratic candidates are mostly for some kind of federal minimum wage increase.  Both parties provide excellent reasons as to why their stance on the matter will benefit our country’s economy as a whole.  A less common discussion involves the effects that minimum wages can have on the behavior of individuals.

Most all companies operating today seek motivated employees that will increase the overall productivity of operations. Not only is it in a company’s best interest to hire motivated employees, but it is also in their best interest to create a workplace environment that motivates employees to maintain high levels of productivity.

Creating a workplace environment that contributes to maintaining high levels of motivation among employees is difficult at best. Reinforcement theory of motivation receives a lot of attention from business managers and academics to address the issue.

Reinforcement theory of motivation was derived from B.F. Skinner who is considered to be the father of operant conditioning.  It states that an individual’s behavior is a function of its consequences.  For example, if an individual’s behavior leads to desirable consequences, that behavior tends to be repeated.  If an individual’s behavior leads to an undesirable consequence, that behavior tends not to be repeated.

Although motivation is a bit of a hypothetical construct, it can be defined, observed and measured using productivity and profitability metrics.  Financial accounting and cost accounting are functions that businesses already perform that can provide observable and measurable indicators of productivity.

Increasing income per hour should occur as a consequence of increased productivity which is an observable result of motivated behavior. Below are a few examples of how reinforcement theory works. The assumptions made in the examples include: (1) More income per hour is desirable and (2) the objective of businesses is to increase the frequency of motivated behavior which is measured by productivity.

Example 1:  If an employee increases their level of productivity and the consequence is that they receive a wage increase, what is the probability that they will continue to increase their productivity? If that employee values more income per hour, there will be a relatively high probability that increased productivity will continue.  If increased productivity does continue, positive reinforcement has occurred. The added stimulus of more income per hour has increased the frequency in which productive behavior occurs.

Example 2:  If an employee is not increasing their level of productivity and they receive a wage increase, what is the probability that they will continue with the same unproductive behavior?  If the employee values more income per hour, there will be a relatively high probability that nothing will change and unproductive behavior will continue. If it does continue, the added stimulus of more income per hour has weakened the probability that productive behavior will occur.

Initiatives that aim to increase minimum wage should consider individual behavior and productivity. Individuals can increase their productivity with more education, training and experience. There is no more important element to sustained economic growth and development than having an educated population. Once productivity increases, individuals can charge more for their labor. Minimum wages are in place as a consequence of unproductive behavior.

Reinforcement theory can offer perspective into how individuals behave when the wrong behavior is unintentionally reinforced.  If wage increases are not consequences of increased productivity, then what behavior can be expected to occur most often?