Wage and Salary Chapter 1

12462 words 50 pages
Milkovich−Newman: Compensation, Eighth Edition

Front Matter

1. The Pay Model

© The McGraw−Hill Companies, 2004

Chapter One
The Pay Model
Chapter Outline
Compensation: Definition, Please? Society Stockholders Managers Employees Global Views—Vive la différence Forms of Pay Cash Compensation: Base Cash Compensation: Merit Pay/ Cost-of-Living Adjustments Cash Compensation: Incentives Long-Term Incentives Benefits: Income Protection Benefits: Work/Life Focus Benefits: Allowances Total Earnings Opportunities: Present Value of a Stream of Earnings Relational Returns from Work The Employment Relationship Combines Transactional and Relational Returns Variations in Transactional and Relational Expectations A Pay Model Compensation
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But this measure masks tremendous variations. When educational choices are taken into account, women’s earnings are 94 percent of those of men. For people age 21 to 35 who live alone and have no children, the gap is close to zero. (Of course, this constitutes a very small segment of the labor force.)2 The gap even varies by cities. Most people were surprised when 2000 census data showed that women in Wichita, Kansas, earn about half of what men earn but that women in Oakland, California, earn more than men.3 Sometimes differences in compensation among countries are listed as a cause of loss of jobs from more developed, higher-wage economies to less developed ones. As Exhibit 1.1 reveals, labor costs in Mexico are about 12 percent of those in the United States. However,
1E. Lawler III, Rewarding Excellence (San Francisco: Jossey-Bass, 2000); Patricia Zingheim and J. R. Schuster, Pay People Right! (San Francisco: Jossey-Bass, 2000); B. Gerhart, “Pay Strategy and Firm Performance,” in Compensation in Organizations: Current Research and Practice, eds. S. L. Rynes and B. E. Gerhart (San Francisco: Jossey-Bass, 2000); B. E. and Mark Huselid, “High Performance Work Systems and Firm Performance: A Synthesis of Research and Management Implications,” in Research in Personnel and Human Resources, ed. G. Ferris (Greenwich, CT: JAI Press, 1998); Barry Gerhart and Sara Rynes


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