Question

How do defined payment structures "fit" in a free market system? Why are they not applied in our sectors of society?

Answer 1

A free market is characterised by a spontaneous and decentralized order of arrangements through which each individual make economic descisions. A country's free market economy may range between very large or entirely black market. Few characteristics of a free market are as follows:

* Voluntary exchange on the basis of laws of demand and supply , without any governement intervention.

* Absence of coercion on transactions in the economy.

* Positive relationship exists between free markets and measures of economic well being.

A defined pay scale is a system that determines how much an employee is to be paid as a wage or salary, based on one or more factors such as the employee's level, rank or status within the employer's organization, the length of time that the employee has been employed, and the difficulty of the specific work performed. For Governement sector jobs the pay scales and bands have been defined by the Governement in particular. Private employers use salary structures with grades including minimums, midpoints and maximums)to define the ranges of pay available to employees in each grade/range.

Defined pay structures fit in the free market system beacsue of the flexible nature of the free market. There is no limit on amount to be spent in the market, however there exists limits on earning capacity of people who work as employees in various sector.