These are not exclusive options. Workers can make a decent wage and be incentivized by bonus programs.
I’m not sure how this is undignified or how to have enough dignity in such a program.
It’s a challenge to try to maximize productivity and having elective programs where individuals can choose to put in extra effort than they normally would could certainly be structured in a way that isn’t compulsory and reduces the risk of someone harming themself.
It certainly would award workers who work harder and produce more than others. And there could be valid reasons for lower productivity (ie, poor health) that are outside of worker control. But I think the aim is not to evenly distribute wages across all workers, but to allocate wages to the most productive workers.
Manual labor is a challenge to manage.