Contents

1. Introduction 2.
2. Labour market
3.
3. Compensation 3.
3.1 Forms of pay
3.
4. Differences in the base wage
4.
4.1 Education/geography 5.
4.2 Degree of competition and the level of demand for the products 5.
4.3 Geography 6.
4.4 Present level of wages 7.
5. Job Evaluation 8.
5.1 Point system 8.
5.2 Individual incentive-pay system 9.
6. Conclusion 10.
References 11.

1. Introduction

In today’s labour market there are a lot of different occupations. When an employee want to perform some of them he/she need to has particular kind of education to perform it well.
Employees with different professions have different expectations of their wage. For example: the supervisor will receive higher base wage than the clerk worker. Why the organizations do not pay every employee the same wage? Why there are differences between the wages in the organizations and also in the labour market?
The purpose of this paper is to answer these questions and find the relations between wages and professions.

2. Labour market

Labour market is created by labour force represented by employees, organizations represented by employers and the government. Employees offer their work to the organizations. Organizations use it to achieve their goals and the government set the conditions in this market such as minimum wage, hiring and lay-offs conditions.

3. Compensation

“Employee compensation includes all valued resources, such as salaries, hourly wage and incentive pay, given by employer to employee as a return for his/her work. Compensation decisions are many and varied. They include how much to pay people who perform both similar and different types of work; whether to use pay to recognize variations in individual employees’ experience and/or performance; and how to allocate pay between cash and benefits and services. These decisions must be consistent both with society’s changing values about what constitutes fair and equitable pay and with government legislation and regulations. “

3.1 Forms of pay
“Base wage is the basic cash compensation that the employer pays for the work performed.

Base wage tend to reflect the value of the work itself and generally ignores differences in contribution attributable to individual employees.”
Changes of the base wage may be made on the basis of changes in the overall cost of living, inflation, changes in what other employers are paying for the same jobs or changes in experience/skill of employees.
“Merit pay rewards past work behaviours and accomplishments.” This form of pay is often given to the employees as increments to their base wage. We should be careful when we are talking about the rewards and returns. A return is given to the employee from employer in exchange for something of value and reward is given for meritorious performance.
Incentives also tie directly to performance. An incentive can be short term or long term and can be given to an individual employee, team of employees or even in some combination of individual, team and unit.
Employee services and benefits include alternative pay forms ranging from “vacations, services (drug counselling, financial planning) and protections (life insurance, pensions).
These four forms of pay make up total compensation package paid to employees.“

4. Differences in the base wage

In the markets everything depends on demand and supply. Why the organizations do not pay every employee in the organization same wage? Simple answer may be: “because clerk typist’s job can be done by almost everyone, but for the job of his/her supervisor we need some kind of education and also experiences are needed. 4.1 Education
Exhibit 1. Exhibit 2.

Exhibit 1. : The relationship between the level of education/experiences and population. To the higher level of education refers smaller part of population, but the basic level of education has almost everybody.

Exhibit 2. : The relations between level of education and the wage. To the higher level of education/experiences refers higher wage and on the other hand side to the lower level of education/experiences refers smaller wages. To the higher level of education/experiences refers better paid jobs than to the jobs in which low level of education/experiences is required. There are less well educated people than the people with low level of education and therefore there will be bigger demand for this kind of labour force. For example: Professor in the Comenius University can perform job of gate-keeper without bigger problems, but if we let the gate-keeper to do the professor’s job he/she will hardly knows the answers on students questions.

4.2 Degree of competition and the level of demand for the products
Both affect the organizations ability to change the prices of its product and services. ”If prices can not be changed without suffering loss of revenues due to decreased sales, then the ability of the employer to pay higher rates is constrained.

The product market factors put a lid on the maximum pay level that an employer can set.

If the employer pays more, then it has two options. It can try to pass on the higher pay level through price increases or hold prices fixed and allocate a greater share of total revenues to cover labour costs”
For example: for many years automakers in the U.S. were able to pass on increased pay levels due to increased car prices. “While the competition between the Big Three existed, they all passed on the pay increases. But then the product market revolutionized. The degree of competition from Japan and Korea increased and due to the slowed economy, the total demand for cars declined.” Both of these factors constrained the firms’ ability to pay and their ability to change pay level. It response, some autoworkers took pay cut and smaller wage increases were accepted. “So the nature of the product demand and the degree of competition in the industry influence the pay level and the ability to change it over time.”

4.3 Geography
Another aspect which influences the wage level for particular job is geography, because qualifications interact with geography. “Some skills, such as those possessed by degreed professionals (accountants, engineers, physicians), are recruited nationally. Others (technicians, crafts and operatives) are recruited regionally and still others (office workers), locally. However, the geographic scope of a market is not fixed. It changes to respond to workers’ willingness or commute certain distance. This prosperity to be mobile in turn may by affected by personal and economic circumstances as well as the pay level established by an employer.”
For example the University of Žilina has technical orientations. It would be less possible to find not an engineer to perform some kind of work, in which technical skills are needed as in the city/region, where the particular University has not at least similar orientation. So in the Žilina will be the supply of technical engineers higher than in the second region. This aspect will determine the level of wages for engineers in the Žilina where the wages will be lower than in the second region. 4.4 Present level of wages
Present level of wages for particular occupations has influence to the future level of wages in this way: In today’s labour market is high demand for programmers so a lot of young people especially boys are studying programming, because they want to have after study high wages.

The consequences of this increased interest for program study will be this: In 4-6 years there will more programmers then in these days so it would be not so difficult to find one to perform work that need this kind of education.
I think the same effect were able to see, when if we focus on economists and lawyers. Few years ago there was great demand for these kinds of professions. After several years the labour market starts to be saturated which has the influence on the pay levels of these professions. It was not so hard to find any lawyer or economist so the organizations may decrease the pay levels.

5. Job Evaluation

“Job evaluation is the determination of the relative worth of a particular job as compared to other jobs, which offers a way to approach the wage structure policy question.” There are several methods that can be used to in the bureaucratic organizations and one of them is point system.

5.1 Point system
“The point system attempts to develop a score (based on points assigned to different characteristics) for a job. This method can be used after job analyses, which tell us the common characteristics of the jobs.
These characteristics may be such things as amount of effort required, the level of education required, the pleasantness of working conditions, the amount of responsibility attached to the job and many others.
Each of these factors can be weighted differently, depending upon their differential importance.” After consideration we can set importance level to education from 1 to 5. As it is shown in exhibit 1. Exhibit 3.
Level of education required on the job Points assigned
Less than 3 years 1
3-10 years 3
10 or more years 5

If the job requires higher level of education then it would receive 5 evaluations points. If there was need for basic education then it would get 1 point.
“Once a list of factors common to jobs at a particular level has been developed, the extent of the combined factors for each job is determined. The score each job receives is then obtained and compared to others, which forms the basis for compensation level” For example a clerk typist’s job may have the score of 50 points while the supervisors one has the amount of 100 points. This simply means that supervisor’s job will have higher base salary than the clerk typist’s. After evaluating all jobs using this approach, we group them together into several “pay grades” on the basis of point similarity. For example jobs which have the score from 0-70 will be paid by $6 to $7 per hour. The hourly wage for jobs with score from 71-120 will be boarded by $8 and $10.
There are also other methods by which we can evaluate jobs.

5.2 Individual incentive-pay system
Individual incentive-pay program is based on finding the equal compensation for made output. An employee wage is determined by how much the employee produces. “High output means high wages and on the other hand side the low output results in lower pay. If we want to use this method three conditions has to be meet” :
1. The individual’s work output can be easily identified and measured
2. Programmed tasks are performed respectively
3. The individual controls the work pace

For example: bank consultant is paid due to his/her output. This output can be easy measured, because is easy to count how many contracts has he/she scrabbled up and how much money has he/she “brings to the company”. Aspect of individual work pace control system gives to these jobs responsibility for achieved goals which is included in the wage.

6. Conclusion

The differences between the wages are natural and people agree with them. If there were not any differences, than there will be no motivation to study or in gaining experiences.
For example: young girl wants be a manageress, because she wants to lead people, but she also wants to have high wage. For this position, managerial skills are required, and therefore she has to study management if she wants to perform this kind of occupation. It can be said that the difference between the wages is the difference between the value of the skills, experiences and education required for the particular positions.

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