That's the way unions do it. That is not the only or even the best way to do it though.
That's the way my shop does it, and it's non-Union. I've never actually heard of a factory, Union or Non, who weighs merits of each individual laborer and pays them separate pay scales.
Many factories copy the union way of doing pay because that's how the unions do it. Also, don't forget that in many states, whole industries are regulated to enforce certain pay systems so that they match the union pay system (Justified so the unions don't have a disadvantage when competing for bids). Look up "prevailing wage laws" if you're not aware of how this works. If your place of business has any contracts or work (or provides finished goods for such work) with any level of government, you're likely being paid that way, not because it's the best way to do so, but because labor unions got laws passed to force any competition into having to use the same inefficient pay structure they use.
There are lots of workplaces where pay is not standardized by position and time. There's absolutely no reason why the same can't apply to more fields except for this entrenched assumption that in those fields (for some apparently magical reason) they just wont work. And it's no coincidence that those fields happen to be those where unions are most prevalent. It creates a circular argument that has no real justification at all. It is that way because it is that way.
Our payroll gal bitches enough as is having to deal with single plant wide scales... I'd hate to hear her whine if that weren't the case.
Your payroll gal isn't the one who sets the wages. She just writes the checks. Someone decides how much the total compensation pool will increase each year, and that someone decides how to divvy it up. It does take marginally more effort to do things like performance evaluations, but in the grand scheme of things, it really is worth it to any business.
That's where things like Profit sharing come in. Before the industry crash the better our company did (which obviously factored in thing like the value of each man-hour worked) the higher percentage you received as the Profit sharing bonus. Obviously... that doesn't happen anymore, no sharing, no bonuses, no raises...
Profit sharing methods are a step in the right direction. But I still think that's often too abstract to have sufficient effect on the workforce as a whole. Remember that each individual by nature desires to gain the maximum pay for himself possible while putting forth the least amount of effort. It's also human nature to measure success relative to those around us. So an incentive that allows you to earn more than the guy next to you if your work is valued more works very well. It makes it worth while to increase effort to put in that better work because you personally get a direct reward. It's a lot harder sell to say "if we all work harder, we all get more pay". Human nature is competitive. We compete with the people next to us. Call it a flaw if you want, but it's not human nature to work harder so that everyone around us (including us) gets more. It also doesn't counter the fact that the slacker gets the same share of increased profits, thus creating a negative presure on the desired outcome. Human nature in that case is to hope that others will do more productive work while you get to reap the benefits. But if everyone is doing this, then there is no increased productivity, no increased profits, and no increased benefits for anyone. But since *everyone* gets the same lack of increase, people will tend to accept it.
If you want, I'll explain how the red/green game works and how it's basically a proof of this. People will *always* take actions that benefit themselves in the short run over those that benefit everyone in the long run. They will do this even when they know that eventually it'll hurt them in the long run as well. Why? Because unless you can ensure that everyone works for the benefit of everyone, no one will. Also, since success is measured relatively, then personal benefit outweighs combined benefit and even combined negatives. If I gain X, and then everyone (including me) loses Y, I'll make that choice even if Y is greater than X
. That's the nature of a red/green game situation. It happens every single time you play it. The lesson of the game is to not structure things that way. But unions are structured that way. Which is why they are not good for labor (or business, or really anything other than the unions own power). Edited, Dec 13th 2012 5:16pm by gbaji