Unit 4.2 - The Wage-Level Decision

Question 1

What are the 3 reasons for establishing a wage level?

Answer 1

1. To attract an adequate supply of labor
2. To keep present employees
   reasonably satisfied with their compensation
3. To avoid costly turnover

Question 2

What are factors influencing the wage level?

Answer 2

1. Management Policies/Preferences
2. Unionization
3. Organizational size
4. Productivity (ability to pay)

Question 3

What are the types of wage surveys and the 4 elements of a useful survey?

Answer 3

Types of Surveys -
* Government surveys (BLS)
* Private industry surveys - expensive
* Company-sponsored surveys - company or group of companies

For do-it-yourself, company-sponsored surveys, 4 conditions should be met:

Survey Elements -
* Reciprocity - companies should share with each other
* Anonymity - wages of individual orgs should be kept private
* Low Cost
* Timeliness - current data

Price fixing (colluding with other companies to set wage rates) is illegal

Question 4

In compensation survey data, what is central tendency, unweighted average, weighted average,

Answer 4

Central tendency - the value of a probable outcome. It is measured as an average through mean, median, and mode.

Mean and median are most common

Unweighted average - mean of the average salaries; each org is treated equally, regardless of # of employees

Weighted average - average of all the individual salaries in the survey

Unweighted average: Total average salary $ ÷ # values
Weighted average: Total salaries $ ÷ Total # values