Factors Determining Wage Structure

So you’re fresh out of university and are officially actively looking for a job. Of course, the first question on your mind is: “How much will I get paid?” Sadly there isn’t one answer that we can provide to give you an accurate indication. However, we have determined that there are various factors that can influence the wage or salary that you will be earning, regardless of the industry you’re interested in working in.

Naturally, various industries dictate their own standards, but there is a generalized set of standards as far as South African labour is concerned. In other words, these factors are relevant throughout all industries our beautiful country has to offer.

External Factors

First we’ll look at external factors that can influence a wage structure. External factors are those that you have no control over and will affect you regardless. We have identified 8:

Economy

Fellow graduate, I’m sure you’ve heard news constantly relating to the economy. Remember when you laughed it off, thinking it didn’t concern you? Well, those days are over. Every dive or rise the economy takes will affect you directly as of today. A bad economy will dictate that money just isn’t available to pay a high wage, regardless of the industry you’re interested in entering.

Cost of Living

When wages are based on cost of living, it is strictly limited to survival. Your employer will pay you a wage that you’ll be able to live off of, but don’t think this includes lavish living. If you can pay rent and buy your groceries every month, your employer will be satisfied.

Government Legislation

This refers solely to the minimum wage. Government legislation dictates that employees may not be paid less than a certain amount and therefore you can be rest assured that this is the utmost minimum that you will be earning. And the chances are that you’ll be paid more than the minimum wage dictates, due to other factors. But we’re getting to that.

Trade Unions Bargaining Power

Belonging to a trade union holds benefit for an employee. They ensure fair work practices in the work place and regulate remuneration incentives. The higher the power of a trade union, the higher your wage will be.

Prevailing Market Rates

This applies to the general industry you will be entering. There is a set wage that employers offer to remain competitive with their competition. This unspoken standard is set to stop competitors from taking their employees by offering them higher wages, and normally stretches above the minimum wage.

Psychological and Social Factors

Most people have a determination to reach success in their field of work. Why else would we have an incentive to work hard? Employers are aware of these desires and are more than willing to allow employees to achieve these feelings of success by granting them higher wages.

Demand and Supply

This is simple economics. When the demand for certain employees in a specified industry is high, it means the industry is very competitive. Employers offer higher rates to obtain the best employees. Therefore, when the demand is low, rates lower because employers aren’t actively looking for the best employees anymore.

Technological Development

As technology develops, so does the skillset of the general labour force. We no longer attack construction projects solely with a wheelbarrow and shovel. We use bulldozers and cranes and all sorts of heavily operated machinery. In order to use this equipment, an employee needs a certain set of skills. Employers are therefore willing to pay higher wages for these skills.

Internal Factors

After considering the external factors, we now have to consider the internal ones. These are the factors that take place within the work place and bear equal weight when it comes to determining wages.

Job Requirements

Different industries require different tasks to be performed. If your job is rated as risky or challenging, whether physically or mentally, you will receive a higher wage, therefore the more extensive the job requirement, the more an employer is willing to pay.

Training Costs

If an employer requires an employee to go for training to build on their skillset, this needs to be accounted for in their wages. Of course, the employee will spend a lot of time away from the work place, and their wages will determine an allowance accordingly.

Ability to Pay

Each industry is different, and wages are categorised accordingly. If an industry tends to run at losses, the wages will be lower. On the other hand, if the industry makes large profits, your wage will be higher.

Management Strategy

Business strategies differ from company to company, and wages are affected by this. If management decides to go with a rapid growth strategy, they intend to maintain a competitive edge, and therefore your wage will be higher. If management decides to go with a strategy that maintains the company’s current earnings, the wage will be lower.

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