Tuesday, January 4, 2011

Unified Equitable Wage Determination

Updated: September 24, 2014

Longevity (years)
Occupational Risk Factor
Pre-job Training (months)
Excellence (top 1/7 =3; top 2/7 to 1/7 =2, all else =1)
Equitable Wage (Mutliple of Minimum Wage)

Longevity as it is used here refers to the length of time spent in an occupation or very similar occupation, regardless of different employers or interruptions in employment. Contrary to popular convention that confers greater pay based on increasing time of service, the actual performance generally hits a crest several years into the job and deteriorate thereafter because of psychological tiredness, slacking off because of a sense of deserving or belonging, or because of slowness from age. The formula adds 0.10 to the base value of 1.00 after the first 90 days and then 0.03 added upon the end of each year up to year 7 and then a very modest decrease of 0.004 for each year thereafter. It is understandable that this convention would receive instant disdain, however, after a careful assessment of what happens in reality should settle any ill-feelings.

Risk value pertains to the risk of bodily injury or death. The formula used is a linear scale based on the differential of the risk associated with the specific occupational field and that of a typical low-risk field. For those fields having less than the typical low-risk field, the factor takes off a mere 1 or 2 percent only. The range of values range from about 1 (lowest risk) to 2 (highest risk). For most occupations, the number would be about 1. Workers in coal mining, forestry and fishing, and aviation pilots are at the high end. With the high risk associated with fishing, the current value associated with risk is actually a little over 2. This category could be extended to include risk of psychological impairment but this category still provides a fairly good estimate of the occupational risk.

Training refers to the length of time (months used here) that is required to perform in a job with proficiency. It does not refer to the amount of time spent in a typical school program that does not efficiently train for proficiency in a field. Thus, typical colleges, including those for lawyers and doctors, that has as its purpose, generation of revenue that conflicts with actual efficiency but that might also be inordinately long to satisfy government or professional board of examiners that dictate the amount of time spent in a school that is based more on whim than reason. This modern world has increased efficiencies in many areas but for schooling, it is behind the times in that more time is being spent in post-secondary school per person now than ever before in history and although some occupations are more complex, the amount of time spent in no way is proportional to the actual job requirements. With schools streamlining in a way not so dissimilar to how military training operates, it would become more financially feasible as far as upfront costs as well as time missed in garnishing a living and fields be filled with the market demands easier. This would also be better for society to be more equitable in that poorer families would have greater opportunities as far as getting into jobs that require college. Though it should be stressed that there should not be so much of a differential between jobs requiring college and those that do not and as a result of this recognition, the poor and anyone else for that matter would not be unduly penalized if choosing to be in a profession that did not require post-secondary schooling. The formula used herein is 1 added to the number of months in concerted training multiplied by 0.00267, whereby 9 months would be able to increase the wage by about 2.5%, a four-year degree or 36 months would be able to increase the wage by about 10%. As a college graduate myself, having had tutored hundreds of college students, and worked in a variety of fields with college graduates and those who have no college education, I can say without reservation that college in the present form is wasteful. The deserving attitude associated with high expectations of generous wages just because of being a college graduate is unfounded. A reasonable amount of wage increase is justified based on the time displaced by being in school as opposed to working and of some amount of increased working capability associated with school, however, it must be noted that an individual's passion and creativity can in a small yet modest percentage provide greater productivity than the mere possession of a degree. I surely hope that very soon, this would be a universal understanding and it be put into practice as opposed to a few people grumbling about this yet society still attributing far too much working capability in terms of salaries to those who spent the time and money to get a degree.

The designation for excellence of either a "3" (signifying performance indicative of the top one-seventh of all workers) or a "2" (signifying performance indicative of the following one-seventh of all workers) shall not be awarded to more than 1/7 nor less than 1/14 of all workers for each category, with the exception if the total number of employees is less than 7 for which a total of two workers may be so designated. The designation of "1" is the default for all others. The wage factor for "3" is 1.15, for "2" is 1.075, and for "1" is 1.00. These designations can be switched from one employee to another based on performance and used as a wage factor for the following complete pay period or partial pay period in the event of change in job characteristic or termination from employment. The basis for pay differential for excellence is obvious but what is not so obvious is the magic number "7", in that this is derived by a rough estimation of 15%, or 1/7, of workers in any given field excel in their field. In every field there are those who under-perform, however, the generous factor of "1" would still apply and it would then be up to the employer whether or not to retain such individuals.

I could add within the chart, a heading for local area price cost of living index or this factor could be done separately. This would require trusted data from an external table or optimally, in prevention of feed-back variables that can induce inflated values, by incorporating the few external factors related to the equitable price of homes as utilized in my other website: Equitable Home Price Evaluator (Advanced).

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There is the human tendency of wanting to ascribe a higher rate of pay to those in what is considered a "higher" level. This is bunk, though an interesting concept of sociology. In some cultures this attribution is extreme as it is in the United States and in some other cultures, it is much less dramatic. In my book, I go into an explanation regarding the high rate of pay for present-day CEOs. Consider if the rate of pay for a CEO was the same or even slightly less than a front-line worker...do you not think that many would be applying for such a job that requires less exertion, great working conditions, and having the ability to dictate? Certainly there would be, in fact more than for a front-line position. The reason is the power, prestige and less physical discomfort even if there is greater responsibility. The increased responsibility is normally the reason for which people typically justify the inordinate high rate of pay without considering that the salary structure is learned from observation beginning at a young age and without question, simply accepts this arrangement as the way it has to be. There is a trade-off for positions of "higher" levels, a trade-off that does not necessarily demand a higher rate of pay. It needs to be altered in people's minds of the view that managers must be paid higher than production workers since they each fulfill a function, neither of them could be done without the other in a significant manner. Regardless if one position oversees and the other produces, there is a combined contribution for each, perhaps one does a certain amount of thinking with a broad focus and does less physical work and the other may be using the mind with a more narrow focus and does more physical work. In essence, these would be roughly equal, except perhaps if there is definitely some aspect of the job that is more burdensome, whether it is from requiring more training and needing to exert much mental effort, or the physical demands or skill in doing work is paramount to the end product. Thus, a reasonable assessment for the rate of pay without letting past reinforced experiences interfere may lead to the manager being paid more, the production worker being paid more, or of them being compensated roughly equal. The hierarchy is unduly regarded as having highly differential perception and this leads to compensation disparities that cannot be defended. The power structure within a hierarchy is necessary for cohesiveness yet should not be stifling to prevent sharing of ideas nor should it reinforce human ego manifestation or inordinate compensation.

Differential pay based on field of work: I purposely discount this. It's just a lot of happenstance of what society deems more worthy but just like the current situation of disparity between managers and line workers, there is a lack of justification beyond the amount of training needed to perform in certain occupations. Compare for example a waiter and a janitor. Each has it's own unique employment characteristics though each of them do not require great training, both can be mastered in short time, one apparently may have great stress at times in dealing with the public and the other may have some disgusting aspects. All in all, how could one say that one of these types of jobs is worth far more than the other? If working for government, a janitor may earn much higher than the average waiter, but a waiter in either a high volume or upscale restaurant may earn far more than the average janitor. Assessing these and other occupations may be more balanced, not withstanding concerted pre-job training, to indicate comparable wages. Sometimes, if lucky, grungy or unpleasant work receives extraordinary pay but if not so fortunate the pay is sub-par. There is a necessary function in society for each and every job so no job should be wholly discounted as being worthless to then be subjected to vastly incomparable wages. Thus, the criteria of time in the job, pre-job training, occupational risk, and whether a person applies themselves to indicate excellence that is deserving of some minor yet meaningful added compensation are the basic underlying features of a job to determine a fair wage.

With the objective of injecting fairness in this world, money earned from work needs to be assessed with greater objectiveness. Old conventions that may have some appeal though when lacking concrete basis they need to be dropped. With compression of wages, greater fairness among people will result. The contribution any one person provides to society can never be precisely determined but there is a reasonable objective way in which this can be done and I am providing a framework for this. Whether a person contributes hundreds of inventions to society, does janitorial work, is a CEO, or is a package carrier, it would be a far stretch to say that a person contributing to society in any of these ways necessarily means they are worth numerous other humans who perform functions in the other occupations. Certainly there are some clear objective measures of contribution and those are the criteria that are stressed herein.

Capitalistic features are still apparent, though sensibly restrained. This wage determination formula that could be tweaked and adopted by government would be a major shift from the irrational view that some people are worth thousands of times others. To enable greater levity to an employer, the wages paid could still go beyond the guidelines but in maintaining equitable wages and being watchful of inflation that has destructive effects on society, the employer would need to supply government with the identical extra wages paid. Many will claim this restrained yet reasonable assessment of wages sounds communistic and because of that alone, it cannot be considered. Some will think without the opportunity to make 10,000 times the average person innovation would be stifled. Such erroneous views are ill-founded. A person having the capacity to excel will excel if given the tools to do so, whether there is a great deal of money as an incentive or not. Perhaps those who complain about a fair wage system are not one of the brilliant minds who would understand that those who are inventive will see to it that their ideas get tested, provided they are not oppressed in doing so. A lack of extreme monetary reward as a motivating factor is not oppression. Society cannot continue on the path of extreme wage disparity and at the same time foster prosperity. For this reason, wages must be greatly compressed, with no longer one person being valued so much greater than anyone else, except by via reasonable rewarding based on highly relevant factors.

This proposal is for employees and not applicable to self-employed, but in keeping with compression of wealth disparity as outlined in my book, those few who "earn" amazingly huge sums would be subject to the limitation of holding onto no more than 500PLE (500 times the yearly poverty level wage) at the end of each calendar year, with the excessive dispensed to circulate in the economy by the person's own choosing, else sacrificed to government.

Additionally, when wages are based on a factor of the mandated minimum wage, no inflation adjustment is needed except as done to the minimum wage and then reflected in all other wages. If the proposal presented in my book is adopted to convert the valuation of currency to 1 monetary unit equaling 1 hour of work at minimum wage, the currency would be well grounded in something that is very relatable and sensible. There would never need to be an inflation adjustment as this system of currency is self-adjusting to inflation.

There will always be a supply and demand issue with employment though it could be rendered insignificant if efficient programs of training are put into use. I go into this topic at: EDUCATION. Basically, when the REALISTIC amount of time required for training is drastically reduced from the present inane system requiring so much time and money expended, there would not only be an abundance of qualified candidates, but there’d be many people with meaningful credentials in several different fields contributing to a vibrant workforce. No longer would it take more than a day of training to perform something as simple as accounts payable when it is so common these days to waste a great amount of money and four years’ time to show employers competence.

A special note regarding players of professional sports as posted on 12/22/2012 at: NFL story

References: Sports Salaries, NFL player average career length

How could a kicker get paid so much and yet foul up so much? We all need to boycott football until the salaries make sense. Based on a life expectancy of 7 years and assuming they can still get at least twice the minimum wage for the rest of their life, to earn the median income over their lifetime, assuming 45 years of work would be about: 38*2PLE+7*xPLE=45*4PLE -> x ~ 15 which translates to about $600K per year, and this is even being generous. The current average salary is $1.9 million. Note the average is the arithmetic mean, not the median. So as you can see from this analysis, football players are being compensated at an extraordinary rate compared to other hardworking persons who make their contributions to society, and on average, actually producing something as opposed to simply supplying entertainment. The PLE concept was introduced in the book "Thoughtful Living" referring to the poverty level earnings. The median salary is presently around 4 times the PLE. This similar formula can be used for other professional sports and when you see that baseball players and basketball players make even more, your effort to boycott these other sports should be more solidified.

Some salaries are best left in the hands of the public by virtue of their participation/support. But the public should be kept aware of the metrics to help guide them in their support of the games and this is not presently made easily available, especially in a form that puts into perspective what I mentioned above.