Wage Determination How much should you get paid?

How Are Wages Determined? O Many factors go into determining how much someone gets paid O Experience O Past Performance O Several Differing Theories

Noncompeting Categories of Labor O 4 categories w/ different levels of knowledge & skill O More training/skill = higher pay O Unskilled Labor – No training/skill O Semiskilled Labor – Mechanical skill & minimal training O Skilled Labor – Higher education & training O Professional Labor – Highest level of knowledge based education & managerial skills

Market Theory O Supply & Demand determine wages O Low D + High S = Low $ O High D + Low S = High $ O Intersection of Supply & Demand sets equilibrium wage O High wages due to family ties or political reasons are only exceptions

Theory of Negotiated Wages O Bargaining strength of organized labor is a factor that helps determine wages O Strong unions force firms to pay more, firms cannot afford labor stoppages O Seniority – Workers that have been there longer get paid more

Signaling Theory O Employers willing to pay more to those with certificates, degrees, or other “signals” that show superior knowledge or ability. O Firm that prefers to hire people with college degrees O Degree may not be needed for work, but helped applicant get the job