3.2- Compensation Concepts

3.2- Compensation Concepts - Unit 4, Lecture 1:...

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COMPENSATION CONCEPTS Prof. John Kammeyer-Mueller MGT 4301 Unit 4, Lecture 1: Compensation Concepts
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Plan Where we are Understand the legal framework for compensation Have a few principles related to compensation known Where we want to be Understand some of the basic ideas underlying compensation plans How we know how we’re doing How can we figure out how much a job should be paid? How does “justice” factor into the compensation system? Unit 4, Lecture 1: Compensation Concepts
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Major Principles in Setting Wages Market pay Employees should be paid what other people in similar jobs in the external labor market are being paid Job analysis Employees should be paid based on difficulty of a job, the demands on workers, and the level of qualifications required Distributive justice and social comparison Employees judge how much they should be paid based on their subjective assessment of what other people like them are being paid Unit 4, Lecture 1: Compensation Concepts
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Market Pay and Wages Why compare to market wages? If firms are “wage takers,” they cannot afford to pay less than competitors If firms are in a highly competitive industry, they cannot afford to pay more than competitors Salary surveys Sent out (usually by consulting firms) asking employers to tell how much they pay workers. Results are sold on the open market. If you want a raise, check out this link Unit 4, Lecture 1: Compensation Concepts
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Trends in Wages Average Hourly Earnings, 1982 Dollars 7 7.2 7.4 7.6 7.8 8 8.2 8.4 8.6 8.8 9 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 Unit 4, Lecture 1: Compensation Concepts
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Factors that Change Market Wages Supply side changes Education level Demographic shifts (baby booms and busts) Immigration Demand side changes Technology Market for domestic goods and services International markets for goods and services Unit 4, Lecture 1: Compensation Concepts
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Technology and Employer Demand Complements in production Complementary technology makes workers more productive, and therefore increases employer demand (MRP of labor increases along with MRP of capital) Substitutes in production Substitute technology replaces workers because the MRP of capital becomes greater than the MRP of labor Unit 4, Lecture 1: Compensation Concepts
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Technology and Employer Demand Complements and substitutes in action Computers complement the skills of professionals and creative workers by making their productive activities faster and less expensive to accomplish Computers substitute the skills of clerical workers by making it possible to completely eliminate jobs like typists, filing clerks, and phone operators Result: increasing wage gap based on skills Unit 4, Lecture 1: Compensation Concepts
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International Perspectives on Technology Why do some countries specialize in low-wage labor and others specialize in high-skill labor? Increasing levels of industrialization increase the need for
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This note was uploaded on 07/18/2011 for the course MAN 4301 taught by Professor Kammeyer during the Fall '10 term at University of Florida.

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3.2- Compensation Concepts - Unit 4, Lecture 1:...

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