Wage Determination

Determination of wages is complex for a given business, there are many factors to consider when setting up wage level. Many factors come into play in several dimensions, such as internal and external to the business.

1) Non-union wage determination – for non-union businesses, a system is established by management to determine wages, using quantitive means. Job content and job value is used to set wage levels.

2) Job Content – How much worth a job is to the business, is determined on skills, duties and responsibilities for measuring how much content a job has.

3) Job Value – How much a job is worth in relation to the objective and goals of the business. How much a job contribute to the bottomlime.

4) Market Job Wage Rate – How much a job is worth within the geographic area. A business will have to consider how much the competition is paying for the job in order to get that job filled.

5) Supply And Demand – How much a job is worth depends on how many people are available to fill a job. A good number of applicants will affect wages as more applicants will work for lower wage. On the other hand, if available jobs outnumber applicants, wage levels are adjusted higher to attract a scarce or rare worker.

6) Cost of Living – Inflation is also considered in wages as workers should be able to have a sustainable living wage. A decent lifestyle including adequate housing, food, clothing, housing, energy, transportation, health care, and education. Capable of setting saving money for future needs.

7) Goverment – Provides the definition of wages for jobs that are protected and enforced by law. Businesses follow these laws and implement them in their wage structure.

8] International – wages can be affected by jobs outside the national boundary when outsourcing of work is considered.

Using the factors described above, determination of wages will depend on the following:

a) Local and Federal laws – A base pay known as minimum wage determines the starting pay of a worker. The minimum pay is used to make sure the worker wage right is protected under law.

b) Job Content And Value – depending on rank and position a pay scale is set just for content and value.

c) Market Rate And Worker Supply – wages are also affected by the market going-rate and how many are applying for the job. Wage is adjusted based on availability or scarcity of skill and talent.

d) Cost of living – A wage is set enough not to depress the living standard of a worker. Instead, a wage is set for a sustainable wage living.

Using all these factors, a standard formula can now be set for a given business:

Wage level = minimum wage + cost of living adjustment + job content and value adjustment + market going rate adjustment

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