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Who determines how much you get paid?

There’s a lot of confusion over the subject of wages and who is in control of setting them. It came up (again) in my discussions about walmart. If you ask someone “Who determines the wages that Walmart pays?” they will usually say Walmart of course. Actually, they have very little control, at least as far as how low they can set wages. Setting them as low as possible and still hire the most qualified people is every businesses aim. But Walmart is unable to make everyone work for minimum wage, they are forced to pay some people more, and sometimes that even includes entry level jobs!

It isn’t so much a who that sets wages, it’s a what. The market sets the value of anything that can be bought or sold. Just as a company cannot charge a million dollars for a pair of shoes, they cannot hire someone at whatever low salary they want either. They can set prices and wages anywhere they want to, but no one will buy from them or agree to work there unless the prices set are in the ballpark of the value set by the market. If walmart wants to hire low skilled workers at minimum wage, but those people could go to anyplace and get 8 bucks an hour, no one will work at walmart until they raise their wages. On the other hand, if walmart offers jobs at minimum wage and their aren’t any other jobs to be had, or if other jobs paid the same but were much worse jobs, then walmart would have plenty of applicants.

So the answer to who sets the low mark for wages is both no one and everyone. It isn’t your boss, and it isn’t walmart, it is the market for labor that sets the standards.

Isaac

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