I work at a major theme park. This theme park recently had a turnover problem- that is, a number of employees were leaving for other paramedic positions that paid more money. To solve the problem, they raised starting paramedic pay to $17.50 an hour- a raise of $3.75 an hour. The medics who had been there for more than a few years are livid. They are claiming that they ‘deserve’ more because they have been there longer.

The American public believes that public employees are overpaid. They complain about what the public employees ‘deserve’ and claim that, since the economy is bad, that public employees should be paid less.

Both positions show a complete lack of understanding of basic economics. The law of supply and demand dictates what an employee makes. The market sets the price of labor. If you, as an employer, pay too little, your employees will leave. The ones that are available to replace them will be of lower quality. That is, the employee is selling a product: his labor. The price of that product is set by the market. Wages are a balance between the supply of people that are capable of providing the labor, and the number of people who are needed to perform that labor.

Numerous things can lower wages. If just anyone can provide that product, then the price (pay) will be low. A good example of this is greeter at WalMart. This position requires a skill set that nearly anyone can master, so the wages for that position are low. The other factor that can have negative effects on wages is the demand for that particular skill. You may be a master of 14th century French poetry, but there is no market for 14th century French poetry, so you will likely become a greeter at WalMart, that being your only other marketable skill.

Conversely, wages can also be driven in the opposite direction. If you bring a skill set to the table that not many people have, you can “auction” off those skills to the highest bidder.

This is the point that many miss. If you think that you are more valuable simply because you have been at a job for a long time, you are wrong. You become more valuable with longevity because you have (presumably) become more adept at the job you are being tasked with as the years went by. Eventually, though, the job is mastered, and your value becomes capped at a certain level. In order to demand more pay, the employee must accomplish two things: he must gain more skill, and must ensure that the skill gained is one that the employer needs. Just like any other product. It is up to you as to whether or not it is worth the effort to improve your product (yourself) for the additional pay.

And to employers: remember that, as your wage scale falls below market value, the more valuable employees will sell their wares to the highest bidder, leaving you with a cheaper, sometimes less valuable product. It is up to you to determine if you are willing to accept the lower level of skill.

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