User:Kasdx/sandbox

'THE MYSTERY OF SALARIES:'

1: Why is it that a Basketballer/Sportsman can command salaries to the tune of millions covering 3-4 lifetime of a university professor, economist, engineer and Medical Doctor all of them combined in a single pay? Answer: Value not placed on input but output:  for whatever subjective reason people are willing to pay to see the unique skills(scarcity) of Mike Tyson at the same time all over the world consequentially generating millions from which shareholders are willing to pay Mike comfortably above and beyond. 1.2: Why is it that some CEOs are paid more than others yet they have the same level of education?? Answer: derivative of question (1) Output: by virtue of the position/ company status: the decision made by one CEO will move (Save/lose/raise) billions in the market compared to another. the movement is basis from which shareholders are willing to pay One CEO millions to protect and generate their fortune while another only thousand. (value placed on the decision) 2: Why is it that a competent man from "Hillcrest technical high school  + Unza " in Zambia gets much less salary compared to the same level of competency a man in USA "X school + Harvard University" for the same job? Answer: The ratio of capital goods in the economy overall as well as at the competent mans disposal eg software's-technology allows the USA competent man to be more productive, thus working in a textile plant as an engineer the USA man is able to account for X more textiles produced a month compared to Zambian man consequentially the USA man can legitimately command more. (Value placed on capital goods) 3: Why is it that certain skills seem to command a lot of money than others? Answers: The level of scarcity overall in the economy helps an employee to command a high salary but this is only short-run as demand increases for any unique skill the more people will want to join the upward trend thus in the long run the salary commanded by that skill reduces as more people join to provide the same skill towards market saturation employers in an economy cant hire more of the same skill or technology supplants the skill. 4: Why is it that governments cannot pass legislation (minimum wage) together with Labor Unions for all to help raise salaries? Answer: Yes, they do but not without the consequences of the zero-sum: Microeconomic theory demonstrates empirically that by keeping wages above the market price what companies are willing to pay has predictable negative consequences. To stay compliant 1: employers tend to hire fewer unskilled/non-essential worker 2: they reduce essential workers and redistribute income to the remaining 3: outsource jobs to cheaper countries 4: change contracts from permanent to part-time 5: reduce working hours. 6: employers tend to take less risks when hiring new recruits or graduates because cost of a mistake is too high ..7: would-be entrepreneurs are discouraged from investing due to high wages causing more unrealized jobs.. (Emphasis on unemployment) 5: Why is it that Governments are reluctant to increase civil servants' salaries? Answer: when the government pays above market price relatively more than private-sector there is an oversupply of labour (Cough: Medical doctors in Zambia) demanding for more government jobs, high salaries in the public sector destroy (healthcare) entrepreneurship/ private sector as the public sector draws all employees to itself by out biding the private sector, consequentially to sustain the system of high demand for government jobs due to high salaries government is forced to tax more, borrow more or inflate by printing money to maintain the system causing an inflationary economic ripple reinforcing cycle of doom (emphasis on surplus labour) 6: Who then ensures high salaries, if the government and labor unions create winners of the already employed at the expense of the to be employed by the stroke of their pen?? Answer: The Market: which is the economic dance between buyer/seller or producer/consumer: The employee as the supplier/seller of labour must make sure he is equipped with the latest/unique skills and best practices consistently to outperform the competition from other workers likewise as a consumer of labor employers must pay above market price voluntarily for retention of competent employees otherwise they are outbid and lose the employee to other competitors (Movement of tech engineers from Google, Amazon, Microsoft, Facebook, Twitter etc) Competition between companies raises the salaries of competent employees!!..(Emphasis on Microeconomics) Conclusion: Competency of the employee and high Competition between companies in the labour market for competent employees insures increasing salaries... There is no company willing to risk a competent employee for an incompetent one because of the real cost to the business if it has to remain competitive to survive.