October 15, 2009

Salary Fixing = Employee fixing

Remember the term price fixing? Where a group of direct competitors within a certain radius would conspire together and decide on a price of a product/service, and offer that product/service at the same price to all their customers? For example, a group of gas companies such as Chevron, BP, and Exxon - all of them in Lakeland, Florida - would get together and "fix" their price for a gallon of unleaded gas at a determined price.  So no matter which location a customer went - the price would be the same.  Therefore the customer has to pay a premium at any gas station, and the gas station were the only ones benefitting from the price fix. 

Nowadays, price fixing is illegal in almost every state and companies can't do this anymore - when it comes to their products that is.  But what about when it comes to the jobs/careers that they offer to their employees?  Well, salary fixing is not illegal at all!   And most employers that are in direct competition come together and determine on what they will pay employees depending on the position.  Ever wondered why there is a certain "range" of pay for a position?  I remember going on several interviews and discussing pay - and in every interview the recruiter would say "the salary range for this position is blah blah".  I sometimes ask myself, "Where did they get the range for this position?"  "Why won't you just tell me what you're willing to pay me? And I'll say yea or nay."

The range comes from an agreed pay amount that is determined by every other company within that industry, for a specific position.  Thus, salary fixing!  This is why no matter what industry one may be in - he/she can't get a better pay from a competitor.  For instance, if you're a supervisor at Geico and you want to become a supervisor at State Farm...well expect about the same level of pay.  If you are a teller working at Bank of America, and you want to become a teller at Suntrust...expect about the same level of pay.  The reason companies do this is to prevent 1 company from having all the human capital or the best talent just because that company is paying a higher salary for the same position.  So to spread the talent around for all - most companies offer the same "range" of pay!

So is your salary fixed?  Or did your employer "fix" you??  Salary fixing appears to be a very liberal thing to do - but does fixing promote competition amongst competitors?  Or should we consider a conservative approach and allow salaries to run amuck?  Would this then create monopolies?  I suppose the answer may lie somewhere in history........

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