The market wage is determined by the balancing of demand and supply. Market wages continually adapt to reflect new demand and supply conditions, rising when demand for a particular type of worker grows faster than supply and falling when the reverse is true. In the last three years, for example, as more and more firms acquired the capability to do word processing, the wage for word processors increased more than twice as fast as the average wage in our local market. Changes in market wages prevent shortages or surpluses from occurring for particular jobs by changing the incentives of both employers and job seekers. Market wages play an important role in allocating workers where they are most needed.
Firms look at wages to determine how many workers to employ in each type of position.
Individuals look at wages to determine which careers to pursue. Market wages, by balancing the demand for workers with the supply, ensure that the interests of employers and workers coincide. Comparable Worth Pay System Wages determined by a comparable worth system will, in general, be different from market-based wages, because this type of system does not consider the demand for or the supply of workers for a particular job. Instead, it bases wages on the attributes of each job. Under a comparable worth system, a group or individual, which I'll call a job evaluation committee, determines the relative value of different job types by awarding points to job attributes.