The economy exists to ensure the needs of people are met. A healthy economy should, therefore, translate into financial security for the vast majority of people. Nearly 80% of Americans, however, live pay check to pay check. Around 10% of those individuals have annual incomes over $100, 000. The vast majority of Americans are either making too little or their modern lifestyles cost too much. Recognizing the impact of geography-driven economic inequality, i.e. a $100,000 income is a small income in some areas, mismanagement of personal finances cannot account for this financial insecurity alone. Given the shrinking size of the Middle Class, alongside the growth in inequality for both individuals and businesses, the economy is not doing what people need it to do. In terms of employer-employee relations, the issue of financial insecurity creates friction. Faced with a low unemployment rate and a shortage of workers as businesses race to serve the demands of a booming economy, business leaders need to reflect on their relationships with employees in order to provide for their operational needs.
The economy largely distributes wealth to average individuals through jobs. For businesses, wealth is largely distributed via consumer spending. When the amount of consumer spending exceeds the amount of income consumer-workers have, consumer-workers are spending at an unsustainable deficit. Ultimately, a correction in this imbalance will mean a dramatic pullback in consumer spending. In turn, businesses will lose business. Unfortunately, the income equality that impacts businesses undermines the ability of many businesses to raise the wages of workers. Certain industries and businesses in certain geographic regions suffer more from inequality than others. This reality serves as a major hurdle to income and economic growth, but not all businesses suffer from income inequality or a lack of capacity to raise wages. It has more to do with the perceptions business owners and managers have of workers as well as how they choose to treat them.
The Industrial Revolution transformed the way people live. It also transformed the way people work. Where most individuals once worked to provide for their own needs and a minority of craftsmen provided specialized services, the Industrial Revolution popularized paying jobs. Paid workers, in turn, became paying consumers. Because people started to rely on their incomes to provide for all of their needs, tensions between employers and employees emerged. Employers needed to keep their payroll costs down in order to ensure the affordability of their goods. Employees needed their employers to increase their pay, so they could afford to buy the products they were no longer making. Obviously, there is also a mutual benefit to having a large consumer base of well-paid workers, but history favored conflict. When employers did not address the growing needs and demands of workers, labor organized and employer-employee relations continually degenerated to new lows. Business and unions literally went to war over pay and work conditions instead of working together to address each others’ needs.
Although the implications of the war on labor are many, including dysfunctional workplace relations between managers and union workers that exist to this day, one aspect often overlooked is the impact on the worldview of management. Business leaders exist in a culture that often demonizes unions and workers. It is a culture that encourages business owners, shareholders, managers, and other leaders to dismiss the needs of workers. It is a culture that encourages managers to both neglect the interests of workers and demean workers when they assert their interests. One consequence of this cultural attitude is a perceived and real lack of respect for workers. Another is poor employer-employee relations driven by the disdain business leaders feel toward their ungrateful, beggar employees and the resentment employees feel toward their self-serving, abusive bosses.
In a tight job market, employers need to entice their workers with improved employer-employee relations and work environments as well as improved pay. When faced with an amble supply of workers, employers also need to cultivate good employer-employee relations and embrace an employee-friendly management style in order to promote productivity. People work for a paycheck. They work hard, because they care and they feel like they have a personal stake in the success of their company. In other words, employees are motivated by their economic need for a paycheck. They are also motivated by their emotional need for a sense of accomplishment and value as well as their social need to belong and impact their “community.” For their part, how business leaders view, treat, and interact with subordinates determines whether or not employees receive the economic, social, and emotional incentives they need. By practicing service-oriented leadership and attempting to address the interests of workers, employers can cultivate the kind of environment where workers want to work and want to work hard.
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