That increasing wages by any reasons are mostly suitable to the Good-Citizen model which are preferred by managers of Theory Y who believes that high incentives and adequate compensations will boost employees’ working devotion to a firm. In the case, we will study the impact of raising the minimum wage on a firm by the federal government after its consideration that a raise is necessary to compensate inflation annually calculated or by any reasons to maintain the minimum cost of living or offer better afford basic necessities where the employees are living. As a result, possibilities are the impacts can be both positive and negative for bottom lines and company values.
At first sight, employees are to be seen satisfactory with the new higher pays if the addition can at least cover the amount “at loss” when the inflation formerly decreased their pockets. However, “a 2010 study by Ball State University's Center for Business and Economic Research found that recent minimum wage increases may have led to as many as 550,000 jobs being eliminated” (Arvidson, 2010). It is resulted from the firms’ reaction to avoid attrition. “ In particular, the increase in the wage rate is likely to motivate firms to substitute away from low-skilled workers toward more automation and additional high-skilled workers.” (Brickley et al., 2009, p. 153)
As mentioned above, a firm with Good Citizen Model can experience minimal effects as it may have considerately adjusted the compensation to update the basic consumption powers such as water and electric utilities and food, for example. According to SurePayroll, out of the respondents of its surveys“ 91 percent are not affected by minimum wage laws because they pay all of their employees more than the minimum wage." (Dickler, 2007)
Moreover, the increase of minimum wage, although increasing labor costs, can significantly reduce the negative phenomena such as common absenteeism, high employee turnover; because the employees’ spirits are...