In the labor market, as in any market, the price is determined by demand and supply factors. Demand indicates what employers are willing to pay and supply indicates what employees expect to earn. Relative salaries of employees are also a factor. Thus, three factors largely determine the basic wage rate: the comparative norm, ability to pay (demand), and cost of living (supply).
Respond to the following:
Identify and describe the circumstances when it would be more appropriate for an organization to follow the comparative norm strategy to determine an employee’ wage rate rather than the ability-to-pay or the cost of living strategies. Give reasons and examples to support your answer.