Workers in jobs demanding hard physical activity or high education often get better wages.
Businesses have a multitude of expenses, one of the largest of which is labor. Companies often employ various strategies to keep labor expenses at a minimum. Even so, several factors dictate what businesses end up paying employees. Most of these reach far beyond the individual business and are a part of the larger economic web.
Worker Availability
When there is a shortage of workers who have the skills, talents, experience and education necessary to complete the tasks an employer needs done, the few workers who are available are able to demand higher pay. Conversely, as the number of workers available increases, employers are able to start offering lower wages. This follows the basic rules of supply and demand, assuming that the demand remains constant.
Location
Employers have to offer wages that accommodate the current cost of living. Thus, in regions with a higher cost of living, wages typically are higher than those where the cost of living is low. In the United States, this generally means that wages are lower in the Southwest region, as data for various industries from the Bureau of Labor Statistics' Occupational Outlook Handbook show. Urban areas generally have a cost of living higher than that found in rural regions.
Task Difficulty
Workers generally receive higher compensation when the tasks they must complete are more complex or difficult. For instance, performing brain surgery is a much more difficult task than something such as typing a manuscript. There often is a correlation between task difficulty and higher education, with those with doctorates typically earning the highest wages.
Efficiency
Efficiency in business means it takes less time or resources to do a job. It means that labor costs go down in most cases. A plethora of factors can contribute to company efficiency and therefore lower labor expenses. For example, if employees constantly have to repair the machinery they use, it takes them longer to finish tasks. Employers subsequently must pay more to complete the same job. Building layout, scheduling issues, conflicts between workers and poor managerial planning are additional examples of inefficiency sources.
Unions
The presence of a union often means that wages will be higher if an employer uses union employees, as the union sets a minimum rate of pay for its members. They are able to keep rates higher by controlling the number of people in the union -- that is, they manipulate supply and demand, as explained by Morgan O. Reynolds of the Library of Economics and Liberty.
Legislation
The Fair Labor Standards Act, or FLSA, is a federal regulation that dictates how employers compensate their employees. In addition to setting a general minimum pay rate, FLSA also dictates what constitutes hours for compensation. In addition to the FLSA, employers are bound by state wage regulations. Employers cannot pay laborers less than the amount specified in these laws.
Employer Philosophy
Some employers place a higher value on labor than others. In some companies, management views employees as the lifeblood of the business. These companies often provide high rates of pay in part as a way to increase job satisfaction and recognize the role this plays in job retention, as keeping employees over time generally tends to be cheaper than recruiting and training new workers consistently. In other companies, particularly when the nature of the tasks do not require a high skill set and worker supply is high, workers are viewed as important but also disposable or interchangeable. These companies don't offer rates that are as competitive.
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