The Triple Bottom Line And Minimum Wage Debate

Introduction

The topic of establishing a minimum wage and determining what level it shall reside at as well as when to increase it is a debate that is highly sensitive in both emerging and developed economies. Australia is considered a developed nation in relation to the economies around the world and is one of many nations that has set a minimum wage. The debate of when to implement increases continues into the future with each annual review. In Australia key stakeholders have the opportunity to submit their stance on the issue of minimum wage and help to provide a basis in which The Fair Work Commission may make their decision. In order to decide in favor or against an increase of minimum wage, one must consider the positive and negative effects on key stakeholders.

Stakeholders

The key stakeholders in the debate for minimum wage have their advantages and disadvantages when it comes to increasing the minimum wage. Employees and Employers are the two most essential parties affected by minimum wage increases. Flavin and Shufeldt argue four main reasons in support of a minimum wage increase from an employee perspective. First, there is the employee which in most aspects would be in favor of increasing the minim wage because more money, specifically more individual income, is particularly important as it helps people meet their most basic needs. Secondly in favor of minimum wage increase, from the employee perspective, a higher minimum wage may help to reduce employee turnover. Third, increasing the minimum wage may promote greater social connectedness and integration for employees. Fourth and last of all raising the minimum wage can boost citizens’ feelings of political efficacy and government responsiveness. While these positives may sound very intriguing to employees there are also downsides that Flavin & Shufeldt point out. First if the minimum wage increases it would be offset by an elimination of jobs which would negatively affect employees. Second, increasing minimum wage allow for a social safety net to be more secure and jobs that are intended to be temporary become permanent for individuals that might otherwise seek different opportunity with better pay. Third, Flavin & Shufeldt suggest that as wages increase for individuals so does their needs and therefore will continue to desire an increase in minimum wage.

Employers on the other hand are more often in favor of keeping the minim wage at a consistent mark. It is often believed that an increase in the minimum wage would negatively affect employment and cause it to decrease overall. However, studies have reopened this argument and have stated a new position saying that an increase in minimum wage can increase employment. This study was conducted in the United States on three different cities to examine the effect of minimum wage on fast food employees. Another study that relates more directly to Australia states in its results “There is no evidence that award wage changes have an adverse effect on hours worked or the job destruction rate” (Bishop, 2019). These studies show that employers could possible gain from an increase in minimum wage. More wages show an increase or no change in employment and allows for citizens to spend more of their money. Therefore, the only reasonable effect that employers could claim by an increase in the minimum wage is that they would have to pay out more money.

Triple Bottom Line

The Triple Bottom (TBL) focuses on the social, environmental, and economic sustainability and responsibility of an organization. What this means is that if an organization looks out for society as a whole as well as taking care of the environment as best as possible and doing their part to support the economy and make a profit then they are more likely to be a sustainable organization in the long run. The first area of the Triple Bottom Line looks at social impact.

Social impact refers to the employees working for an organization, customers, suppliers, and society in general. Beginning with employees, employees have to be treated fairly and given the opportunity to grow and prosper in an organization. In relation to earlier discussion ‘Minimum wage shouldn’t be the standard if you want employees to stick around’ (Patel, 2017). If an organization gives its employees, the bare minimum then they will put in the bare minimum. Other social areas of the Triple Bottom Line are affected by the decisions a company makes and the organization should do their best to reach out to those parties and make sure they have a positive impact on them. To understand the ideal organization when it comes to a socially just company one can examine Archie Carroll’s pyramid of social corporate responsibility. The first level is economic which ensures a company makes a profit, the second level is legal responsibilities (obeying the law), the third level is ethical responsibilities (being ethical), and lastly is philanthropic responsibilities (giving back to the community). By fulfilling all four levels of this pyramid companies can maximize their social impact.

The second part of the Triple Bottom Line is environmental. An organization’s environmental impact should be limited in negative effects and aim to make the best positive impact on the environment. Recycling, Reusing, and Reducing waste are three basics that any organization can start with. Gimenez, Sierra & Rodon state that “Environmental sustainability is often related to waste reduction, pollution reduction, energy efficiency, emissions reduction, a decrease in the consumption of hazardous/harmful/toxic materials, a decrease in the frequency of environmental accidents, etc.’ Reducing all of these activities for an organization can ensure they are making the least negative impact on the environment. Organizations should also try to incentivize employees and customers to be environmentally responsible through their company culture and mission statements.

The last part of the Triple Bottom Line is economic. The economic factor focuses on a company making a profit. Profit is essential for a company to stay alive. When an organization begins to make a profit, it should look to better itself in the other areas of the Triple Bottom Line as to ensure that the company remains sustainable and can maintain a profit well into the future. Patel states that the Triple Bottom Line becoming more and more important is not just a social trend, but it also helps to keep a company sustainable.

Recommendation

Simply put I believe that the minimum wage should be increased only to allow it to increase as does inflation. 2-3% annually depending on the well-being of the economy in the previous year. Furthermore, since Australia has been the only developed country to go 27 years without a recession (O’Brien, 2019) I believe that income should remain relatively stable in relation to inflation effects. Minimum wage should be set at a mark that is useful to individuals entering the workforce and to be able to provide for the most basic of needs. However, I do agree with the argument that minimum wage increases affect individuals’ desire to improve themselves and seek other opportunities (Flavin & Shufeldt, 2017). I do not believe that minimum wage should be the standard of a living wage because jobs that pay minimum wage are not meant to be a career or a job that someone is supposed to spend their whole life working at.

Conclusion

In rebuttal to my belief, one could argue that increasing the minimum wage would decrease the number of jobs available as well as hours available for existing employees. Clemens & Strain argue that they “estimate that relatively large minimum wage increases (defined as those exceeding $1) reduced employment among low‐skilled population groups by just over 1 percentage point. Smaller minimum wage increases, as well as increases linked to inflation indexation provisions, appear to have had much smaller (and possibly positive) effects on employment over our sample period.” (Clemens & Strain, 2018). This is based on a study conducted in the United States. The final results of their study were aligned with their initial suggestion and shows that minimum wage increases that are less than one dollar and close to inflation increases have minimal negative impact and, in some cases, even a positive result. Although this study was conducted in the United States and not Australia it is still a basis in which we can reflect on.

References

  • Brecher, R.A. & Gross, T., 2018. Employment gains from minimum‐wage hikes under perfect competition: A simple general‐equilibrium analysis. Review of International Economics, 26(1), pp.165–170.
  • Bolwell, D., 2016. To the Lighthouse Towards a Global Minimum Wage: Building on the International Poverty Line. Australian Bulletin of Labour, 42(1), pp.1–37.
  • Flavin, P. & Shufeldt, G., 2017. The State of the Minimum Wage: Federalism, Economic Policy, and Workers’ Well-Being. The Forum, 15(1), pp.167–187.
  • [bookmark: _Hlk19044820]Gimenez, Sierra & Rodon, 2012. Sustainable operations: Their impact on the triple bottom line. International Journal of Production Economics, 140(1), pp.149–159.
  • Clemens, J. & Strain, M.R., 2018. THE SHORT‐RUN EMPLOYMENT EFFECTS OF RECENT MINIMUM WAGE CHANGES: EVIDENCE FROM THE AMERICAN COMMUNITY SURVEY. Contemporary Economic Policy, 36(4), pp.711–722.
  • Valentine, Tom, 1996. The Minimum Wage Debate: Politically Correct Economics? Economic and Labour Relations Review, The, 7(2), pp.[188]-197.
  • Fair Work Ombudsman. (2019). Welcome to the Fair Work Ombudsman website. [online] Available at: https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/minimum-workplace-entitlements/minimum-wages#who-determines-minimum-wages [Accessed 8 Sep. 2019].
  • Patel, D., 2017. The Millennial Marketplace and The Propagation Of The Triple Bottom Line. Forbes. Available at: https://www.forbes.com/sites/deeppatel/2017/07/28/the-millennial-marketplace-and-the-propagation-of-the-triple-bottom-line/ [Accessed 8 September 2019].
  • Bishop, J. 2019. The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss: Bulletin – September Quarter 2018. Reserve Bank of Australia. Available at: https://www.rba.gov.au/publications/bulletin/2018/sep/the-effect-of-minimum-wage-increases-on-wages-hours-worked-and-job-loss.html [Accessed 9 September 2019].
  • O’Brien, G., 2019. 27 years and counting since Australia’s last recession. Home – Parliament of Australia. Available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook46p/LastRecession [Accessed 9 September, 2019].