Organizations have considerable choice as to how much emphasis to place on various determinants. These choices lead in turn to variations in the wage structures that organizations create. But organizations do not have total freedom in the design of wage structures. Besides the determinants so far considered, there are a number of other influences on the design of wage structures that will be considered in this section. These influences are often indirect in that they influence the design of jobs and therefore the way the organization is likely to evaluate it in relation to other organization jobs. These influences are society, the labor market, unions, and the organization structure.

Society

People and institutions both have a hand in designing jobs and wage structures. Craft unions, for example, determine the kinds of work their members do and expect employing organizations to adjust to these decisions. Jobs for clerical workers are structured by the institutions that train them, with the result that clerical jobs are often quite similar in different organizations.

Professional employees and managers insist on having a say in the design of their jobs, and the result is influenced in part by the institutions that train them. At the other extreme are semiskilled factory employees. Organizations employing these workers are subject to little influence on job design by either employees or unions, except in job-redesign decisions. Unions of semiskilled factory workers typically insist, however, on participating in the latter decisions. This participation is guided by customary relationships among and within employee groups. Custom also operates in nonunion situations, causing resistance to change in job design.

A further societal influence on jobs and wage structures is the technology used by the organization and changes in that technology. But technology seldom provides rigid boundaries. It typically provides choices within which management, unions, and competitive pressures can operate in designing jobs and job relationships.

The Labor Market

The labor market influences the wage and salary structure through the supply of labor. But organizations differ greatly on how many of their jobs are highly market-oriented, particularly in those organizations in which the labor supply is mostly provided from within the organization. As discussed in chapter 10, most organizations replace the external labor market with an internal labor market that makes decisions by administrative means rather than according to supply and demand. These organizations have restricted ports of entry, which are highly sensitive to the labor market but rely on the organization's internal labor supply to fill most job openings. The exception occurs when there is an internal and external shortage of people to fill vacancies for specific skills. In fact, any job for which qualified people are in short supply becomes a market-sensitive job. But given relatively adequate labor supplies, the labor market determines wages only if the labor market: is structured by unions, is otherwise well organized, or is designed to fill openings from outside the organization.

Shortages in the labor market provide those who are qualified to fill the jobs an opportunity to negotiate better terms of employment. A part of this negotiation is for a relative increase in pay greater than other groups are obtaining. This, of course, runs into the problem of customary relationships already discussed. But another part of the negotiations is for a "better job." Workers in jobs where there is a shortage of qualified workers will demand changes in job content that will increase the job's value to the organization and in the eyes of other workers. Computer programmers are an example of a group of workers with a skill in short supply in a new and expanding industry. The independence of action and discretion allowed this group of employees is based, at least partially, on the continuing shortage of this skill.

The product market also affects wage structures through cost-oriented jobs. Such jobs exist where profit margins are sensitive to changes in unit labor cost. If the ratio of unit labor cost to price is critical, the jobs involved become cost-oriented jobs, and organizations will strongly resist changes in their wage rates, especially changes not made by other organizations. Organizations that compete in the same product market, those whose prices are interrelated, or those experiencing or anticipating increased competition or decreased demand may regard any increase in unit labor costs as a threat, especially when labor cost is a significant proportion of total costs. On the other hand, employees in these areas often recognize the advantageous position they are in and seek maximum advantage.

Unions

Unions affect wage structure, but the differential effects of craft and industrial unionism and the type of bargaining relationship are considerable. Craft unions tend to determine craft rates as well as the design of craft jobs for all organizations employing members of the craft. The limit of craft rates is the cost-price resistance of employers. Industrial unions, on the other hand, are more concerned than craft unions with employing organizations, but less concerned with product markets because they often bargain with organizations in many product markets. Thus, industrial unions may attempt to impose a common wage structure on organizations, even if the wage structure clashes with product-market realities.

Within organizations, industrial unions are concerned with equalities and differentials among particular groups of jobs. They often serve to reinforce custom and tradition in jobs and wage structures, while they resist changes that might decrease employee security. If the industrial union deals with organizations in a common product market, it may attempt to impose a common job design and wage structure by comparing rates of a number of reasonably comparable jobs. But even in such cases, the influence of industrial unions on wage structure is light compared with that of craft unions.

Unions also affect wage structures by resisting lower wage rates for jobs downgraded by technological change and by demanding that increased productivity arising from any source results in wage increases. Typically this means that wages of changed jobs are not cut but often increased when the changes result in increased productivity. Such job rates distort rational job and wage structures, and a series of them can so impair an organization's cost-profit position that management is forced to fight for a revised, rational wage structure. Union strategy, with respect to general increases, can also affect wage structures. Flat cents-per-hour or dollars-per-month increases maintain absolute differentials, but compress the structure in relative terms, whereas flat percentage increases maintain relative differentials and increase absolute differentials. Industrial unions especially may follow a policy of cents-per-hour increases because most of their members are in lower-paid groups. But unions cannot maintain this strategy in the face of opposition from higher-paid groups. In fact, worker preferences and resulting labor-supply shortages force restoration of relative differentials in both union and nonunion situations.

But probably the strongest influence of unions on wage structures is the quality of the union-management relationship. As mentioned, some unions take an active part in job evaluation, and their interest in a rational wage structure results in reduced grievances over wage inequities. Other unions, most of them craft unions, seek to preserve customary relationships and job security, resist changes in job content and structure, and are uninterested in the employer's problems of maintaining economic efficiency. Still other unions seem totally uninterested in job designs and the wage structure of the organization and (1) insist on no wage cuts when job content changes, (2) demand wage increases for all increases in job productivity, (3) strongly resist job-content and other changes calculated to increase productivity, and (4) encourage wage-inequity grievances. In such cases job, and wage structures become chaotic, and correcting the irrationalities may require long and bitter strikes, which are often prolonged by political struggles within the union resulting from the wage inequities.

The Organization

Organization decisions on job and wage structures represent a balancing of the aforementioned forces. But the strength of these forces varies by organization type and within organizations by job clusters. Organizations made up largely of members of craft unions have wage structures almost completely determined by the union. Organizations in construction, printing and publishing, the railroads, longshoring and maritime work, and entertainment offer examples of union-oriented wage structures.

Organizations whose members come largely from a well-organized and competitive labor market but are not unionized have what might be called market-oriented wage structures. Organizations of this type have only limited choices, because jobs are easily identified and are quite uniform throughout the market. Banks, insurance companies, department stores, and restaurants are organizations with primarily market-oriented wage structures. Professionals are groups of employees whose jobs have been designed largely by the educational process they have been through. This makes for a commonality between organizations in the design of professional jobs.

Organizations having many specialized jobs, dealing in labor markets too disorganized to provide adequate grading and pricing, and lacking unionization have primarily internally determined wage structures. Such wage structures may be influenced by product markets, but only if labor cost is high relative to total cost. Internally determined wage structures result from management decisions and may range from highly rational structures flowing from job evaluation to a system of personal rates. Organizations in small towns, isolated locations, or nonunion communities provide examples, as do unique organizations in larger communities, and government employment.

Most large, unionized organizations have what might be called union-and-product-oriented wage structures. In these organizations, wage structures represent management decisions shaped and restrained by technology, unions, and cost-price relationships, and the product market. Technology provides some uniformity in job structures in organizations engaged in common lines of production. Unions, through their insistence on traditional relationships, establish some key jobs and job clusters and provide an upward thrust to the entire structure. Cost-price relationships and the product market compel the organization to resist this upward push and to make changes in jobs and job relationships in line with such resistance. Low ratios of labor cost to total cost and inelastic product demand, however, reduce competitive pressures on organizations. Organizations in many branches of manufacturing, in mining, and in some service industries are examples of organizations with union-and-product-oriented wage structures. Organizations with this kind of wage structure can eventually get into a competitive bind.

Organizations with internally determined or union-and-product-market-determined wage structures leave large portions of wage structure decisions to management. Wage structure determination in these organizations follows closely Dunlop's theory of key jobs, job clusters, and wage contours (see chapter 3). Key jobs acquire their status from labor markets, product markets, and comparisons with other organizations, often fostered by unions. Job clusters come from technologies and employee skill groupings. Wage contours originate in customary comparisons with other organizations, again often fostered by unions. Custom strongly influences all three.

But although organizations can be classified as having wage structures that are oriented primarily in one of the four ways just outlined, organizations of any considerable size have job clusters that fall more comfortably into one or more of the other categories. Organizations employing artisans, unless they are members of an industrial union, are usually forced to develop a union-oriented wage structure for this job cluster. All organizations employ clerical workers, and the wage structure of the clerical job cluster is largely market-oriented. Professional employees (such as engineers and scientists) have salary structures that combine market orientation and internal determination, regardless of the major activity of the organization. Managerial salary structures are primarily internally determined except in very tight labor markets, without regard to organization type.

Thus the typical organization develops and administers at least four or five of the following separate wage structures: shop, clerical, craftsmen and technicians, administrators, engineers and scientists, sales, supervision, and executives. Although, obviously, there will be relationships among these separate wage structures, the strength of these relationships varies by organization and over time.