Page 658 - Business Principles and Management

Chapter 24 • Rewarding and Developing Employees

minimum wage rates that apply to most businesses within those states. Only six
states do not have their own minimum wage. As with all states, the federal mini-
mum wage law still applies. Many states set their minimum wage rate at the same
level as the federal rate. However, in recent years, more and more states have estab-
lished a higher minimum wage than the federal level. Figure 24-1 shows the states
with the highest minimum wage rates in 2006.

COMPENSATION DISCRIMINATION Employers must also follow laws establishing fair
levels of compensation. One category of compensation law deals with equal com-
pensation. It states that employers may not pay unequal wages to men and women
who perform jobs that require substantially equal skill, effort, and responsibility
and are performed under similar working conditions within the same business. It is
legal to have compensation differences based on seniority, merit, or the quantity or
quality of production. More broadly, employers are prevented from using compen-
sation plans that result in unfair differences in compensation levels based on race,
color, religion, gender, national origin, age, or disability.

COMPETITIVE PRESSURES
Businesses are influenced by their competitors when establishing pay rates.
Prospective employees will usually consider several businesses when deciding on a
job and will be attracted to those that offer the best combination of compensation,
benefits, working conditions, and possibilities for advancement. So businesses must
offer compensation that is competitive with that of similar businesses. On the other
hand, if compensation levels are much higher than competitors’, it will be difficult
for the company to control costs, prices, and profits. If wage and salary rates are
high, the company will need employees who are more productive and maintain
a high level of quality in their work.
As businesses respond to more and more international competition, it is no
longer possible to compare compensation levels with those of competitors in the
same state or country. U.S. businesses have been forced to compete with companies
in countries that have much lower wage rates. As a result, many companies have
moved some of their operations to those countries to take advantage of lower

FIGURE 24-1 Minimum Wage Rates of Selected States, 2006

State Minimum Wage

Washington $7.63

Oregon $7.50

Connecticut $7.40

Vermont $7.25

Alaska $7.15

Rhode Island $7.10

District of Columbia $7.00

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