Do you think you should be making more money at your job? Why is the new guy making more than you? Is it fair to be making close to minimum wage even if you have a college degree? The amount of compensation you receive from your employer might not seem logical. However, your superiors probably know what they are doing. Learn more about the factors employers look at when they determine the amount of money that goes into your paycheck and benefit packages. The combination of all of these factors, not just one or two, determines how much your skills are worth.
Experience
Experience is a key factor in hiring and promotional considerations. In order to be compensated for your experience, it should be relevant to your current position. For example, if you have ten years of work experience flipping burgers, they are worthless if you start a new job in manufacturing. However, if you’ve been a file clerk for ten years, you’ll probably earn more than the new file clerk who was hired yesterday.
Education
Any education you receive after high school could contribute to higher compensation, but it depends on what type of training you receive and what type of job you do. If you have a general Bachelor of Arts degree, you might be hired somewhere as an entry-level administrative assistant making $10 an hour. On the other hand, if you have a more specialized degree such as a Bachelor of Science in chemical engineering, you could start an entry-level job making twice as much. Entry-level jobs for college graduates vary widely based on the nature of the work and the type of educational background required.
Complexity of Work
The complexity of a job is determined by its difficulty and the degree of skill and judgment needed for proper execution. Answering phones requires less skill and judgment than operating a tower crane, so office assistants are paid less than tower crane operators.
Supply and Demand
You may have a specialized ability, but you won’t be highly paid for it if a lot of other people have it and few employers want to pay for it. For example, to be a good artist generally requires a lot of skill and training, but many talented artists are out of work or paid little. This happens because employers don’t need them as much as other types of workers and have plenty of other artists to choose from. In comparison, biomedical engineers and physician assistants are highly skilled, in high demand and in short supply. They are paid well. This illustrates a basic economic principle called supply and demand, which applies to labor just like any other commodity.
Supervision Required
If your job requires a lot of direct supervision, your employer will need to divert more of its resources to paying your supervisors. If you have a job that requires little or no supervision, you’ll probably be paid more.
Management
If you supervise other employees, you will be suitably compensated for the additional responsibility you have. The more workers you oversee within a company’s structure, the more you will be paid compared to the other employees.
Physical and Mental Demands
Some jobs demand extra physical or mental exertion. Firefighters and medical personnel are examples of workers with difficult demands who are compensated for their extra efforts.
Work Conditions
If certain elements in your work environment are unusually dangerous or strenuous, you will be compensated more. Hazardous work sites and non-traditional schedules are examples of unusual work conditions, which is why occupations like construction and deep-sea fishing are generally well paid.
Regulation
Sometimes wages are affected by external regulations such as union scales, government pay grade systems and minimum wage laws. These regulations alter what compensation would be if purely left to supply and demand principles. If you work for a union or a government agency, your compensation might differ from someone else’s with a comparable position in the non-unionized private sector.
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