Flexible Public Holiday Arrangements: An Example of an Efficiency Wage

The pandemic has spotlighted the value attached by workers to non-monetary rewards in the form of flexible work arrangements.

"We value our employees’’, ‘‘Employees are our biggest assets’’, ‘‘Employees are invaluable for us’’, etc. Phrases such as these are common across company websites and other public-facing communication. Nonetheless, how does an employer demonstrate that they value their employees? This question has been answered in myriad ways by different disciplines (see, for instance, Shields et al. 2015). Economics, in its neoclassical version, provides what is possibly the least compassionate answer: by paying a wage equal to the marginal productivity of the worker.

"The employee appreciates being paid a 'high' wage and hence works harder; the employer pays a 'high' wage and obtains increased output per employee," suggests Fabrizio Carmignani, Professor at the University of Southern Queensland and Professor Ambika Zutshi.

Fabrizio Carmignani and Ambika Zutshi explore the evolving concept of the efficiency wage through the lens of flexible public holiday arrangements. The piece highlights how offering non-monetary rewards, like flexibility in public holidays, can enhance both employee satisfaction and productivity.

Here are a few takeaways:

• Efficiency Wage and Employee Productivity: The concept of the efficiency wage suggests that employers can enhance productivity by paying higher wages to encourage greater effort from their employees. This principle extends beyond monetary rewards to include non-monetary benefits, such as flexible public holiday arrangements, which can similarly boost employee motivation and output.
• Importance of Employer-Employee Dialogue: Successful implementation of flexible arrangements requires open communication between employers and employees. A consultative approach, where both parties agree on the parameters of flexible work arrangements, maximizes the potential for mutual benefits and avoids pitfalls associated with one-sided policies.
• Redefining Efficiency Wage in the Modern Era: The COVID-19 pandemic has highlighted the significance of non-monetary rewards and flexible work arrangements. As the work environment continues to evolve, integrating flexible public holiday arrangements into the broader concept of efficiency wage provides a strategic opportunity to enhance employee well-being and organisational effectiveness.

Fabrizio Carmignani is a Professor of Economics and Head of School and Dean (Business) at the University of Southern Queensland, Australia.

Professor Ambika Zutshi holds a Bachelor of Environmental Sciences, a Master of Environmental Management, and a Doctor of Philosophy.

You can read the full article for free on our website.

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