The market determines what employees are paid

Dear Joan:
I am the Executive Vice President of a small manufacturing and distributing firm. I read your article in the paper with great interest. While I am not usually inclined to write to the paper or to its columnists, I felt a need to make a few other points to you.

While you are absolutely correct in stating that the compensation structures are changing and for good reason, I felt you should have strongly taken exception to the statement that a 3 percent increase is, as your letter writer stated, "...a slap in the face".

Our company has a two or three part compensation program which pays bonuses based on company and/or individual performance, in addition to the base salary. We were given a 3 percent cost of living increase on the base salary. To my knowledge, no one was insulted.

I know people who have lost jobs over the last 10 or so years because their merit pay increases led them to a salary level over the years which is far above the market value for the position, and made it impossible for a company to continue paying them, versus a less senior, less expensive employee during a time of downsizing. It is also difficult or impossible for these people to find positions that pay them at the level to which they had been accustomed.

A company is not obligated to pay more than a fair market wage to any employee, regardless of age or seniority. Employees operate in a free market and if they are underpaid, the company will lose them and will eventually need to re-evaluate its pay structure. Because of this, I felt your advice should have been to tell the writer to look at what he/she could get for a similar job elsewhere. If a job is worth $7.00 per hour to a company or in the market, then employees should get paid $7.00 per hour, regardless of seniority. Employees in training may need to accept something lower than the market level if they do not possess all of the necessary skills.

As far as [the 3 percent raise being] "inhumane" treatment and [the writer being concerned about] "keeping my head above water", your letter writer should look into developing job skills which bring more compensation than what his/her current position offers. It is not the company's responsibility to overpay employees simply because the employees want a higher standard of living or because the company is profitable. Profit sharing or some of the other methods which you mentioned are much better and more equitable ways of distributing profits or rewarding exceptional performance than are base pay merit increases.

Thank you for your insights and the many fine points which you did make. I am planning to see if we can use some of the information in your column to reinforce the philosophy and understanding of our company's compensation system.

Answer:
I'm glad you took the time to write and underscore these points. Unfortunately, there are a number of people who believe that they should be paid more because the company had a good year; because their co-worker got more; because their kids are going to college; because they've been on the job longer; or any number of other reasons than the appropriate ones.

I agree that companies created this monster by overpaying employees for the wrong reasons during the post war years, and now that the big companies are shedding these overpaid employees, some of these people are angry and resentful. They feel that they got screwed by big business, and in a convoluted way, they were. They were led to believe that time on the job counted more than performance on the job. They believed that it was the company's responsibility to manage their career and income levels, and they thought that their experience would carry them beyond requirements for more education. When it didn't work out that way, they have to blame someone or something other than themselves.

I hear people complain that they can't make ends meet, or that they have to work two jobs just to make what they used to make at their former company before they were downsized. They say there are no good jobs left anymore. They aren't able to see past their bitterness. Because if they looked around they would see more high paying jobs than ever. These jobs are standing open because companies can't find enough qualified applicants. They are calling for new skills that companies need, and if underemployed people aren't willing to acquire those skills they are choosing to stay stuck in their $7 an hour rut.

When faced with the cold, harsh reality that more education may be necessary to improve their marketability, I often hear excuses. They don't have time to go back to school, or they don't have the money, or they have too many community and family commitments. Yet they are quick to criticize those who have made those sacrifices and who are passing them by. I am not sympathetic. I know just as many full-time employees, with a family and multiple commitments who plug away at a degree or other continuing education. And many of these are single parents on a shoestring budget. I did it, and so do many others. If someone chooses not to, so be it, but stop the bellyaching.

I suspect I'll get a flurry of nasty letters from people who think I'm part of the evil business conspiracy keeping them from a prosperous lifestyle. I guess that's bound to happen when people don't want to face the truth.


Joan Lloyd is a Milwaukee based executive coach and organizational & leadership development strategist. She is known for her ability to help leaders and their teams achieve measurable, lasting improvements. Joan Lloyd & Associates, specializes in leadership development, organizational change and teambuilding, providing: executive coaching, CEO coaching & leader team coaching, 360-degree feedback processes, retreat facilitation and presentation skill coaching and small group labs. Contact Joan Lloyd & Associates at (414) 573-1616, mailto:info@joanlloyd.com, or www.JoanLloyd.com 
 
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