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Justified Wage

Sharpness of ‘Justified Wage’

A justified wage refers to income determined by buy dynamics, work experience, education and skill. Justified wage is the wage true that is high enough to attract workers but low enough to enable corporations to offer employment. The divergence between a justified wage and minimum wage may depend on diverse factors including the state of the economy and level of unemployment.

BREAKING DOWN ‘Legitimized Wage’

For example, the justified wage for a worker in a fast-food chain with two years of event may be $10 per hour. In a recession, the actual level of wages for this labourer may drop to just above minimum wage due to the high level of unemployment and a unmoving economy. After the Great Recession, many investment banks legitimatized lower wages due to slow economic growth. (To learn more in investment banker wages, see: What Drives Investment Banker Earnings)

Justified Wage for Employees

Companies may compare their employees’ remunerations and work experience when determining a justified wage. For example, Meagan, a au courant employee has 10 years’ experience and receives a salary of $65,000. Homed on this information, management determines Paul’s justified wage is $60,000 accustomed that he has eight years’ experience. Management may also consider other circumstances when establishing a justified wage, such as what responsibilities the staff member has and the revenue they generate. For instance, the amount of commission a stockbroker take downs could justify his or her wage. Employees can help determine their vindicated wage during pay reviews by discussing how they add value to the company.

Substantiated Wage for CEOs

When determining a justified wage for a CEO, the board typically reflect ons:

  • Leadership: What leadership skills does the CEO have? Does he or she contain the ability to unite the senior management team and lead by example during meanwhiles of transition? A CEO’s justified wage might be based on his or her ability to motivate wage-earners.

  • Strategic Ability: Does the CEO allocate resources effectively? Do they present markets that enable the organization to grow and attract new customers? For admonition, the board of a multinational company may determine the justified wage of a CEO by his or her proven phonograph record of successfully entering foreign markets.

  • Network: A CEO’s justified wage strength be dependent on how effectively he or she can utilize connections. For instance, do they have the gift to lure senior executives from competitors? A CEO may have a higher rationalized wage if they have contacts that allow them to defend new suppliers and customers.

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