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Determining the right wage for employees

Determining employees' wages is a difficult task for employers. There is a long list of factors, which include balancing the best interests of the business and employees, that play a role in setting wages.

Across the country, businesses and employees are talking about wages. With unemployment lower than it's been in more than a decade, business owners are having a difficult time attracting talent. Yet, employees and job seekers say wages aren't high enough. Why is this happening?

The New York Times explored this question recently. In a Q&A with the owner of a roofing company in Omaha, Nebraska, they looked at how small businesses determine wages.

Two points to highlight:

  • The business pays employees $17 an hour because it is the prevailing wage for that type of work, and is having trouble finding employees.
  • They use H-2B visas to hire foreign workers because they can't find local talent, even though they argue the pay is fair.

The question presented to the employer in the story is why don't you pay employees more if you are having trouble attracting talent?

Many observers, including some economists, say if people won't accept your wages, you aren't paying enough. Business owners say in order to pay more they would have to raise prices, which consumers will not accept. It's the delicate balancing act of pleasing employees and consumers, while maintaining a healthy bottom line.

This is the difficulty of setting employee wages. Businesses owners generally want to be fair to their employees, but they also have to protect the business's best interests.

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