THE RELATIONSHIP BETWEEN WAGES AND EMPLOYEE PRODUCTIVITY

ABSTRACT

To be able to boost employee performance, management needs to pay attention

to the salary element and the quality of working life. This study tries to determine

whether the quality of the work environment affects how well people perform in relation

to their pay. Primary data in the form of a questionnaire is the sort of data being used

employees of a manufacturing business are sampled by stratified random sampling.

linear regression and moderated regression examination of data. The outcome revealed

a considerable adverse impact on employee performance and salaries. Another result is

that the influence of intrinsic motivation (quality of work) causes the negative effect of

salaries, which is reduced by the quality of work life is more effective than intrinsic

incentive, such as money. The pay variable is somewhat moderated by the quality of

work life.

It is advised to do more research to broaden the current study by including

independent variables that influence employee performance, wages, employees,

performance, and moderated regression analysis are some of the terms used.

Keywords: Wages, Quality of Work Life, Employees, Performance, Moderated

Regression Analysis.
 INTRODUCTION

One of the purposes of someone being the employee or a labor of a company is

to earn an income in the form of wages or compensation. Earned money can be used to

pay for needs like food, clothing, and housing. Every business must be feasible when

determining how much an employee will be paid so that the lowest salary is given to

cover their basic necessities. The cost of living, inflation, and other factors are increased

by the computation of wages productivity and growth.

Individual productivity and organizational productivity are the two facets of the

idea of work productivity. Mental attitude and individual attempts to enhance one's

quality of life are examples of an individual dimension connected to personality traits of

the individual. The link between input and output approaches serves as the context

through which organizational aspects examine productivity (Kusnendi, 2019).

The wages are crucial because they must really be connected to productivity if

they are to be successful. According to Umar (2018), a successful pay plan should

support the sustainability of the work unit, the accomplishment of the purpose and

vision, as well as the accomplishment of the work's objectives. Although there is a

positive association between pay and employee performance when measuring

employee productivity using net value added, the rate of growth of net value contributed

per worker is slower than the rate of pay increase per worker. It implies that there are

non-monetary elements that affect employee productivity in addition to salaries (Nayak

and Patra, 2019). As a result, we experimentally analyze in this study how wages affect

employee productivity. These factors encouraged the researcher to conduct the study,
which demonstrates the importance of the wage problem in terms of employee

productivity.

To embrace the practice of distributing stocks in exchange for productivity, the

US, the originator of the idea that salaries should be based on improvements in

productivity, has viewed productivity levels as the measure of salary hikes. Raising

salaries after seeing gains in productivity or the practice of past salary increases in

order to boost productivity is how these events are reflected in labor literature. The

European branch of the New Keynesians produced the second method, known as the

effective wage approach, which has been the subject of considerable dispute since

1980. It is used to explain why pay levels deviate from the Walrasian equilibrium values.

The studies are not constrained to these, and the relationship between pay and

productivity has been examined in a variety of ways. Salop (2019), Shapiro and Stiglitz

and Tsionas (2015) have used panel unit root and cointegration analysis in their studies

that investigate the relationship between wages and productivity with an approach that

also accounts for unemployment as a variable. It has been stressed by Bildirici (2015)

that there was no correlation between productivity and earnings in Turkey. We also

acknowledge that unusual events that occurred after 2019 have led to deviations from

manufacturing productivity and the relationship between labor productivity and wages.

But in addition to causing aberrations, these variables also kept the labor productivity

among the lowest in the OECD. As a result, the rate of increase in labor productivity

from 1980 to 2000 was just 2.7%, compared to 5.6% for nations in East and South Asia

(OECD, IMD). When looking at the years 2013 to 2015, when Turkey had somewhat
recovered from its worst crisis, it appears that the country is still among the OECD

nations with the lowest productivity growth rates.

The conventional way of calculating productivity on a manufacturing basis divides

the amount of input by the output that is produced as a consequence of production. If

this number is less than 1, it indicates that prices are increasing. The employer's direct

and indirect tax obligations as well as other expenses imposed on the employee's

behalf are the main causes of the cost increase. Since labor expenses are the biggest

component of costs, they will be especially taken into account while discussing costs.

Although Ireland and Turkey, the two most productive nations, have a productivity

disparity of 3.8 times (%283), the difference in gross earnings is just 67%. The high

gross wages in Turkey are mostly due to taxes on earnings (direct taxes, indirect taxes,

and other responsibilities). Taxes on earnings increase gross compensation by severing

the connection between productivity and pay scale. The impact of taxes on wages,

particularly the effective wage, has been addressed in economic literature, and

economists have concluded that there is a significant impact. According to research on

taxes in labor markets in the context of efficient wages, how taxes are specified affects

wages and employment [for example]. Hoel, 2019; Delipalla; Malcomson and Sartor,.

Because of the structure of the specific nation under examination, many analyses

are based on direct taxes. The employer's payments made on behalf of the employee

(the employee's cost to the business) raise gross salaries, which in turn raises input

costs generally. On the other hand, direct taxes, indirect taxes, and liabilities are

considerable in Turkey. In terms of employment taxes in 2019, Turkey ranked third out

of 30 OECD nations (including dole payments, employer-paid income tax, and total
employee and employer contributions to the Social Security Foundation). Turkey has

risen to the top spot by 2019 and maintained it in 2018 (based on statistics from the

OECD, TISK, and IMF). The percentage of employment taxes that companies paid

between 2017 and 2019. In order to establish a connection between Turkey and other

nations, several Turkish-specific indirect taxes are not taken into account in this

comparison.

Earning money through pay or other forms of remuneration is one of the benefits

of working as an employee or labor for a corporation. Earned money can be used to pay

for needs like food, clothing, and housing. Every business must be feasible when

determining how much an employee will be paid so that the lowest salary is given to

cover their basic necessities (Kanzunnudin, 2017). The computation of wages increases

inflation, economic growth, and productivity in addition to the needs of a worthwhile life

(Iqbal, 2018). Individual productivity and organizational productivity are the two facets of

the idea of work productivity. It takes the shape of an individual dimension that is

connected to the personality traits of the person or personal initiatives to enhance one's

quality of life and mental attitude. The link between input and output approaches serves

as the context through which organizational aspects examine productivity (Kusnendi,

2018).

Wage-related factors become crucial since they must really be connected to

performance to be successful. The viability of the work unit, the realization of the vision

and purpose, as well as the accomplishment of the work objectives are all expected to

benefit from an effective pay strategy (Umar, 2019). Although wages and employee

performance have a positive link when measured by net value added, the rate of growth
of net value contributed per worker is quicker than the rate of increase of pay per

worker. implies that there are non-monetary elements involved in enhancing employee

performance in addition to salaries (Nayak and Patra, 2019).

 LITERATURE REVIEW

Wages

Earning money through pay or other forms of remuneration is one reason

someone works for a firm. received pay to cover necessities like food, clothes, and

shelter. Every business must consider feasibility when deciding how much to pay

employees in salaries so that even the lowest income can cover their basic necessities

(Kanzunnudin, 2017). Some economists have opinions on what wages mean. According

to the misesian theory, more job possibilities can only arise if nominal wages for

employees are reduced (Syahdan, 2017). The implicit contract model briefly illustrated

how the agreement between the employer and the union determines the salary of

employees in a firm.

As a result, pay rates cannot be as readily altered in the presence of powerful

unions as they might in a market that is completely competitive. If there is a recession,

this will cause wages to become inflexible and especially wages will be very difficult to

drop. This hypothesis states that businesses typically set wages higher than the fully

competitive market equilibrium rates. Insider-outsider models believe that both the labor

and commodity markets are not flawless. The pay rate is decided by the collective

bargaining agreements between unions and employers if the labor market has both and

there are just a few businesses. Insiders in a union are referred to as such , whereas

outsiders are those who are not members. The contract's wage determination is

expected to be higher than it was in the situation in a market with perfect competition.

The primary economic subject is wage flexibility, which is mostly discussed in literature
pertaining to company-provided incentives. In order to motivate workers to work for the

business's benefit, a variety of theoretical models have been established to explain how

compensation plans should be created by the organization. Put some effort into your job

in order to increase business profits (Prendergast, 2019). If wages are significantly

correlated with performance, they constitute a crucial component of effectiveness

(Umar, 2018). The most difficult responsibility for the industry is awarding salaries,

which is also the most important factor for employees since the quantity of

compensation influences the size of the worth of their labor in the eyes of the

employees, their families, and their communities. Wages are crucial to the industry

because they represent the efforts made to protect its human resources in order to

maintain a high level of loyalty and dedication. Effective pay strategies are anticipated to

support the workforce's sustainability, the implementation of the vision and purpose, and

the accomplishment of work objectives (Umar, 2018).

Quality of Work Life

The International Labour Conference, the phrase "quality of work life" was first

used. However, it has only lately acquired popularity as a result of United Auto Workers

and General Motors' initiatives to get workplace enrichment and more chances for

self-development. To motivate staff members to further their development (Arifi, 2019).

Working life is presently associated with a variety of words, including quality of work life,

culture change initiatives, flexible work schedules, employee interactions, and workload

reduction (Harrington, 2017). Additionally, the goal of integrating working life flexibility

into the workplace is to meet the demands of women who work outside the house.

Extended working hours currently affect many facets of life. Currently, prolonged
working hours have an impact on many facets of a person's career, including hiring,

taking time off, team composition, and corporate social responsibility. Regarding the

goal of the quality of the work life, there are two points of view. According to the first

perspective, a range of factors and business practices, such as promotion policies,

democratic management, employee engagement, and safe working conditions, all

contribute to the quality of work life. Others contend that the view of employees on the

quality of working life is that they want to feel secure, generally satisfied, and have the

opportunity to properly develop as human beings (Arifin, 2018). The idea of "quality of

work life" emphasizes the value of respect.

An organization's ability to change its workplace culture in a way that is both

technically sound and compassionate improves the quality of work life (Arifi, 2019). The

measurement of work-life quality will affect how positively employees feel about their

jobs and the company, how productive and intrinsically motivated they are, how effective

the company is, and how competitive it is in the face of global business (Tjahyanti,

2018). A very important component is human resources. The business is in charge of

preserving the standard of living at work and encouraging employees to provide their

best effort in order to help the firm reach its objectives (Pruijt, 2019). The human

resources division's function has a significant impact in The human resources division

plays a significant function in determining the workers' strategy. A good quality of

working life will produce competent, devoted, and productive human resources, which in

turn can enhance employee performance (Haryati, 2019).

Employee Performance

Because it may be utilized as a gauge of effectiveness in assisting the success of

the organization's employees, measuring employee performance is a crucial activity

(Said, 2018). Job volume, job quality, and punctuality are all taken into account when

calculating labor productivity (Simamora, 2018). Age, gender, education, employment

history, job placement, and work environment are among the personal traits that have

an impact on performance. Two elements—internal factors acting and external factors

acting—have an impact on performance. Competence, skills, knowledge, motivation,

attitude, and experience are traits of the post holders. Environmental organization office

holders, such as surveillance, communication, training, and performance evaluation in

an organization, are examples of external variables. Human output has a significant part

in determining success.

The effectiveness of the workforce significantly affects the success of the

business. Human productivity is frequently described as having the mental attitude that

now is always preferable to yesterday and tomorrow. The link between the variables

that affect income (salary, allowances, overtime, increments, and punishments) and

wages that may have an impact on performance is depicted. The quality of the job,

which includes the ability to mediate the link between pay and performance, employee

engagement, problem resolution, career growth, pride, and a safe working environment,

are other considerations.

 METHODOLOGY

Research Design

This research is analytic with quantitative research because it has limitations in

research problems. Using respondents' responses to a questionnaire as the primary

data, deductive patterns are used to explain the truth. The tools were structured

questionnaires with variables for salaries, employee performance, and a moderating

variable for quality of work life. Positive and negative comments are used as questions

for the questionnaire. Indicators range from highly positive to very negative for each

item instrument. By separating the population into homogeneous groups,

proportionately stratified random sampling, a technique for sampling, is used to

determine the number of samples using a probability sample. Every sample is stratified

proportionately. The gathering of information through the distribution of questionnaires

to 100 workers with a minimum tenure of one year. Samples were obtained using

standardized random sampling, with sample selection dependent on how the

population's data units were categorized. Random sampling is used to choose groups of

each layer. The sample size for this study was established using a proportionate

calculation using data from the whole employee population that had been filtered to

include only those who had worked for more than a year. By comparing the overall

number of employees across departments with the number of employees in each

department, samples are proportionally selected from each department.