I LOVE comments. Please leave some even if they are brief half-formed ideas
that you aren't even sure you really believe. I just love comments.

Thursday, January 15, 2009

A schmidge more about compensation

First, I want to disclose that compensation interests me because one way or another, compensation determines who works for you and how hard. In some sense this is true of pricing as well. But prices are for everyone and compensation is for each one. Anyway, that's why I'm concerned about it.

Matt proposed a very powerful rule: Compensation is based on scarcity. Lots of things are wrapped up in scarcity such as the time it takes to train a worker with a set of skills, natural ability and the undesirable nature of the work.

Liam seemed to suggest another motivation for different levels of compensation, that is matching responsibility/authority.

I wonder if there is a third element of difference which is custom. My suggestion is that if society has viewed a position as being less worthy of compensation, it will be compensated less regardless of how scarce it is.

For the time being, I would like to keep it within the same field. But consider idea versus detail jobs. I think idea jobs are always better compensated than detail jobs. Is that because those capable of idea work are more scarce that those capable of detail work, or is it because in order to maintain order idea people need to be better compensated, or is it because we have customarily compensated idea people more generously.

No comments: