Week 1 D 2

Discuss the various factors that influence a company’s competitive strategies and compensation practices.  Assess how a company can mitigate these factors using effective compensation practices. Respond to at least two of your fellow students’ postings.


2-2 Explain the factors that contribute to pay differentials based on occupational characteristics.

An occupation (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss301) is a group of jobs, found at more than one company, in which a common set of tasks are performed or are related in terms of similar objectives, methodologies, materials, products, worker actions, or worker characteristics.

File clerk, clerk typist, administrative clerk, staff secretary, and administrative secretary are jobs in the office support occupation. Compensation analyst, training and development specialist, recruiter, and benefits counselor are jobs in the human resources management occupation. Considerable variation in pay between occupations can be explained by the complexity of knowledge, skills, and abilities (KSAs) that define jobs (for example, surgeons and building service workers). Another important factor is the labor market dynamics of the supply and demand for qualified employees.

Pay variations can also be observed within occupations, also based on the complexity of KSAs associated with different jobs that define an occupation, and we will look at some examples shortly. It should be noted that references to differences in KSAs or relative worth of different jobs are based exclusively on job content and demand for individuals who possess the required KSAs. These references do not convey value judgments about the worth of these jobs in society or to the value placed on the people who hold different jobs. The same applies to pay level references.

KNOWLEDGE, SKILLS, AND ABILITIES In Chapter 6 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch06#ch06) , we will address the role of job analysis to provide detailed descriptions of jobs based on differing combinations of KSAs. Typically, jobs that are based on knowledge and skills, which are developed based on formal education (vocational education, college education) or early job experiences such as internships or apprenticeships (for example, in the cases of medical doctors or plumbers, respectively) are highly valued as measured by pay levels. Jobs with less specialized or complex KSAs are typically paid much less.

Let’s consider one job from the health care practitioners and technical operations occupation and one from the office and administrative support occupation. According to the Occupational Outlook Handbook,

anesthesiologists focus on the care of surgical patients and on pain relief. They also work outside of the operating room, providing pain relief in the intensive care unit, during labor and delivery, and for those who suffer from chronic pain. Anesthesiologists work with other physicians and surgeons to





2.2 Pay Differentials Based on Occupatio…

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decide on treatments and procedures before, during, and after surgery. Preparation for becoming an anesthesiologist requires advanced training that includes completion of medical school, internships, residencies, and attaining medical board certification. In May 2013, the average annual salary was $235,070.

According to the Occupational Outlook Handbook, secretaries and

administrative assistants usually answer telephones and take messages or transfer calls, schedule appointments and update event calendars, arrange staff meetings, handle incoming and outgoing mail and faxes, draft routine memos, billing, or other reports, and maintain databases and filing systems. Typically, high school graduates who have basic office and computer skills qualify for entry-level positions. Most secretaries learn their job in several weeks. In May 2013, the average annual salary was $34,000.

Pay differences are also evident within occupations because of different job requirements. Let’s consider pharmacist and pharmacist technician jobs, which are part of the health care occupation. According to the Occupational Outlook Handbook,

pharmacists possess advanced training to give them the knowledge and skills to safely fill prescriptions, verifying instructions from physicians on the proper amounts of medication to give to patients, check whether the prescription will interact negatively with other drugs that a patient is taking or any medical conditions the patient has, and instruct patients on how and when to take a prescribed medicine and inform them about potential side effects they may experience from taking the medicine. Pharmacy technicians support the work of pharmacists while under their supervision. For example, technicians, take the information needed to fill a prescription from customers or health professionals, measure amounts of medication for prescriptions, package and label prescriptions, and organize inventory. Pharmacy technicians do not require advanced education; most of their training takes place on the job. Average annual pay reflects these differences. In 2013, pharmacists earned $116,500 while pharmacy technicians earned $30,840.

SUPPLY AND DEMAND Companies’ demand for qualified individuals for particular jobs relative to supply often influences compensation. There are upward pressures to raise starting pay when the demand for qualified workers in particular jobs is greater than supply. These market dynamics require that companies compete for limited qualified workers. This appears to be the case for information security analysts. According to the Occupational Outlook Handbook,

demand for information security analysts is expected to be very high. Cyberattacks have grown in frequency and sophistication over the last few years, and many organizations are behind in their ability to detect these attacks. For instance, the retailer Target experienced a breach of their databases that contained customers’ credit card numbers. Analysts will be needed to come up with innovative solutions to prevent hackers from stealing critical information or creating havoc on computer networks. Also, the federal government is expected to greatly increase its use of information security analysts to protect the nation’s critical information technology (IT) systems. Further, as the healthcare industry expands its use of electronic medical records, ensuring patients’ privacy and protecting personal data are becoming more important. More









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information security analysts are likely to be needed to create the safeguards that will satisfy patients’ concerns.

A common assumption is that high demand for workers applies only to highly skilled jobs. But, that assumption is not correct. Recently, retailer Wal-Mart announced that it would raise the pay for all of its U.S. employees to at least $9 per hour, which would exceed the federal minimum wage level by $1.75 per hour (when this book went to press).

Through the middle of 2015, there were 14 states that have a minimum wage requirement that is the same as the federal minimum wage requirement. This move would raise the pay of more than one-third of the company’s workers. Wal-Mart made this decision, in part, because it has been more difficult to hire well-qualified workers at lower pay rates, particularly since the unemployment rate has declined.



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