ETHICAL PROBLEMS IN PRICE AND WAGE
DETERMINATION
THE PROBLEM OF PRICE AND WAGES (a) equity or capital
Price as the compensation for material goods. (b) total value of assets used
Wage as compensation for services rendered. The preferred basis is usually equity or capital as it is
usually comparable with amounts that may be
The problem in price and wages is how to determine invested in alternative investment schemes.
them so that they will be fair to Entrepreneur,
Producer, Seller and Consumer. Price in Fixed Price System is Fair Price
ETHICAL CONSIDERATIONS IN PRICING Fixed Price System - the seller is expected to
establish the lowest prices for his goods (which he is
Price Theories are as varied as the prices willing to accept) and the customer is in turn
businessmen establish for their products. expected to take or leave them at the price quoted.
These pricing differences depend on the Advantages Of A Fixed Price System;
businessman’s concept of fair price.
Speed
Open Market is accessible to many people Equality For All Buyers
prepared and willing to serve and is not Minimum Prices
artificially closed by ignorance or by a price Honesty Between Seller And Buyer
control law.
Requirements Of A Fixed Price System
PRICE depends on the law of supply and
demand. The more the supply, the less is the (a) The seller must give his final price.
price: the less the supply, the higher the price. (b) The fixed price should be the same for all buyers.
METHODS OF DETERMINING FAIR Fixed Price Scheme - the same price for a particular
PRICE product is charged for all buyers in each store.
Fair price is directly related to the BARGAINING OR MOVABLE PRICE SYSTEM
determination of fair return. Bargaining Process - one of the ways by which
FAIR PRICE RELATED TO FAIR RETURN individual businessman makes his prices. It takes
place in an open market where the prices of goods.
“What is fair return is difficult to determine
The seller usually names a price that is two
since it varies with each industry?”
to four times as high.
Pricing Structure of a company is fair when its The buyer usually starts with an offer that is
profit is equal to the average profit in the same one third to one half.
industry for the same amount of capital and total The process of “haggling” may last for more than an
resources used. hour.
In determining fair return, the value of the Unethical Practices Techniques In Pricing
capital on which the return is based must be
established. a. Varying Price Policy – the price varies with each
buyer, depending on whether he is a favored
Two commonly used bases are: customer or he has bargaining ability.
b. Follow-the-leader Pricing – pricing goods at community rate) results in a fair wage. However,
almost the same level as the better known and better such a claim is valid only if all the companies have a
quality products, even if they could be sold at a lower minimum wage high enough to maintain a decent
price. standard of living.
c. Odd Price Policy – this practice uses odd Financial Condition Of The Company – the
numbered prices such as P8.97, P9.93 and P10.99 established wage should be fair not only to the
instead of using whole numbers such as P9.00, employee but also to the owners of the business. The
P10.00 and P11.00. wages should not be so high that nothing is left for
the owners as compensation for their risks and
d. Loss Leader Pricing – this makes the customer
efforts.
believe that all articles being sold in the store are on
sale. This pricing scheme is unethical because METHODS BY WHICH WAGES ARE
deception is again involved. ESTABLISHED
THE PROBLEM OF FAIR WAGE There are several methods by which wage is
established.
Wage and Salary Administrators have great
difficulty in determining fair wage in times of It may be determined unilaterally by the owner of the
inflation. business
The labor unions clamor for higher wages to through discussion between the employee
compensate for price increases. and his boss
through collective bargaining agreements
Factors to Consider in Establishing Fair Wages
through job evaluation and merit increases.
The fairness of an employee’s wage depends on
The method used is not necessarily to be blamed for
whether the go-setter considered the following
unfair wage determination.
factors:
Duties and Responsibilities and the Requirements
Of The Job. - This is probably the most important in
determining fair wage.
How much an employee is paid should be based on
the complexity and difficulty of his job.
Laws And Regulations. The employee should be
paid in accordance with law and the regulations
issued by the government.
Cost Of Living – a fair wage is sufficient to meet the
increase in the cost of living. Thus, if the cost of
living goes up by 20%, the wage should also go up
by 20%. Unfortunately, this idea of wage indexation
where wage is automatically adjusted with the
increase in cost of living, cannot be met by the
majority of employers.
Going Rate Or Community Rate – there are some
wage and salary administrators who claim that paying
employees the average of what other companies are
paying for the same job (the going rate or the
