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Normative models of endogenous salary increase in employees' careers

Of the to models noted in the OP, which do you think most apropos to today's labor market?


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Xelor

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Some folks think material wage increases should be available under the following model (A):
Model A:


  1. [*=1]Contract to sell labor to a buyer whereby the general nature of labor sold is relatively constant. (take a job)
    [*=1]The seller expects the buyer to annually and voluntarily increase the price the s/he pays to the seller. (receive raises)
Other folks think material wage increases should follow this model (B):
Model B:


  1. [*=1]Contract to sell labor to a buyer. (take a job)
    [*=1]Develop new labor skills that one, in turn, sells to the buyer at a higher price. (Get promoted and be paid more because the job requires more)
I happen to think it preposterous to expect that Model A will result in wage increases that yield increases in the quality of life one has. The wage structure in my firm aligned with my thinking in that regard. For example, the salary range for given employee position was rather narrow, however, the pay differential between a given position and the next higher one was significant. Consequently, the way to increase one's salary was to develop new skills and apply them so as to earn a promotion. (The model was similar but different at the partner level, but partners are owners, not employees.)

So, which of the two models noted above do you think most apropos to today's labor market?


  • Note:
    • I'm not asking for your thoughts regarding other models.
    • You either think one of them more apropos than the other, or you don't.
 

Amelia

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In Model B, the employer needs to factor in the cost of higher turnover if there are teeming masses at Level A, with significantly fewer positions at Levels B, C, D, ... and no expectation of pay increase for people at Level A being solid, productive workers year in and year out.

Maybe Model B employers want to use up and discard workers every year or two. I don't relate.

That's part of the reasoning which went behind my vote of Model A.
 

bubbabgone

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Depends on what the business is.
 

Idiometer

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The job market is, like the economy as a whole, cyclical in nature. Neither of these models applies to all employers.

Small companies have the luxury of being able to know all of their employees personally. Large employers apply bureaucratic guidlines and use categories or ratings to assess employees, usually annually. I've worked for both. While the larger companies can afford to pay more and provide more benefits, smaller companies are much quicker to recognize value in an individual. It's a trade-off.

In the 1990s, it was a seller's market. Businesses were booming and hiring. Wages were stellar, especially in high tech. When the dot com bubble burst in 2000-2001, the job market became a buyer's market, with dozens of qualified workers competing for a single opening. That worm is slowly turning in the last few years. The biggest tell is the advertisements for job search sites like Indeed -- where previously they geared ads towards job seekers, note that now, all of their ads are directed at HR or small company CEOs.

I'm a retired Technical Writer. My best earning years were 1995 to 2001 when I was an independent contractor. The same work today would still only garner me about 80% of what I was earning 20 years ago, so wages still have a lot of catching up to do.

I did better with smaller companies where I was visible and not just a number, and merit raises and bonuses were based directly on individual performance.
 

Xelor

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In Model B, the employer needs to factor in the cost of higher turnover if there are teeming masses at Level A, with significantly fewer positions at Levels B, C, D, ... and no expectation of pay increase for people at Level A being solid, productive workers year in and year out.

Maybe Model B employers want to use up and discard workers every year or two. I don't relate.

That's part of the reasoning which went behind my vote of Model A.

Under Model B, when a buyer of labor has a dearth of employees above the entry level, the purchase it from folks who have the skills. The nature of the work those experienced hires perform is not materially different than that which they've performed previously. Thus the training burden is material only for entry level employees, and that training isn't terribly expensive, though neither is it without cost. The thing is that the only time the training investment proves to have not been "worth it," is when the employee doesn't provide about three months of post-training labor. (Ever wonder why most probationary employment periods are 90 days?)
 

washunut

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Some folks think material wage increases should be available under the following model (A):
Model A:


  1. [*=1]Contract to sell labor to a buyer whereby the general nature of labor sold is relatively constant. (take a job)
    [*=1]The seller expects the buyer to annually and voluntarily increase the price the s/he pays to the seller. (receive raises)
Other folks think material wage increases should follow this model (B):
Model B:


  1. [*=1]Contract to sell labor to a buyer. (take a job)
    [*=1]Develop new labor skills that one, in turn, sells to the buyer at a higher price. (Get promoted and be paid more because the job requires more)
I happen to think it preposterous to expect that Model A will result in wage increases that yield increases in the quality of life one has. The wage structure in my firm aligned with my thinking in that regard. For example, the salary range for given employee position was rather narrow, however, the pay differential between a given position and the next higher one was significant. Consequently, the way to increase one's salary was to develop new skills and apply them so as to earn a promotion. (The model was similar but different at the partner level, but partners are owners, not employees.)

So, which of the two models noted above do you think most apropos to today's labor market?


  • Note:
    • I'm not asking for your thoughts regarding other models.
    • You either think one of them more apropos than the other, or you don't.

For many companies both models exist. Different than a CPA firm or a law firm where the thinking is pretty much up or out. That is understood by the workers going in.

For many firms people who stay at the same skill level will receive wage increases in line with inflation, or a bit more. If someone hopes for a meaningful raise,they would have to show they deserve a promotion as you stated.
 
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