Raising wages for low-skilled jobs is often framed as a humanistic gesture that runs counter to market logic. A 2025 study by Lumumba Seegars, Serenity S. Lee, Erin M. Reid, and Lakshmi Ramarajan, published in Academy of Management Journal, suggests something else. The market does not disappear when a living wage is introduced. It continues to operate, but without being explicitly acknowledged.
The authors conducted 64 interviews with employees and managers in a U.S. organization that implemented a living wage policy. Pay increases exceeded 30 percent of base salary, in some cases more than USD 10,000 per year. The personal effects were clear: reduced financial insecurity, greater stability, and improved quality of life. So far, nothing controversial.
Where the study becomes interesting is at work. By explicitly breaking the link between pay and performance, the organization did not eliminate merit-based logic. It left it intact, but implicit. Managers, deprived of salary as a tool to differentiate contribution, shifted their expectations. More autonomy, more initiative, more engagement. Not out of ideology, but to restore coherence between compensation levels and perceived value creation.
Employees, for their part, did not resist this logic. They internalized it. Many adopted behaviours typical of professional roles: longer hours, constant availability, and a reluctance to be seen as mere executors. In doing so, they rebalanced effort and pay relative to market norms, without the rules ever being clearly stated.
The lesson is therefore not that living wages are naive, nor that markets are immoral. It is more uncomfortable than that. Market rules cannot be partially suspended without creating role ambiguity. Employees and managers infer on their own that higher pay comes with higher expectations, and this inference has tangible consequences for how people invest themselves at work.