compensation in a knowledge-based global economy

8/12/2019 Compensation in a Knowledge-Based Global Economy

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Assignment

On

Compensation in a Knowledge-Based Global

Economy

Course: Compensation Management (HM- !"#$


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%ubmitted &o:

'r Ataur a)man, *ro+essor

Department of Business AdministrationGreen University of Bangladesh

Accomplis)ed By:

Name: Md. Abdul WahidD No: !"#!#$#!%

Bat&h: !"#!

'rogram: MBA

Ma(or: )*M

Department of Business Administration


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Ac,nowledgement

All admiration and praises are solely to +Almighty Allah+ hose mer&y absolutely

enabled me to pursue the study in Business Administration Department and

&omplete the Assignment su&&essfully for the &ompellation of MBA. am giving

-pe&ial han/s to My respe&ted tea&her and report supervisor 'r Ataur a)man,

*ro+essor, Department of Business Administration, Green University of

Bangladesh for his effi&ient guidan&e, /een interest, timely instru&tion, valuable

advi&e and &ontinuous en&ouragement throughout the report or/ and &ompletion

of this report.


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Table of Contents

SLNo. Title Name Page no.

1 .&O'/C&O.

2 Compensation %trategy

3 Capitalism and Knowledge in a Global Economy

0 Compensation and Organi1ational %trategy

5 ntegrating Knowledge and s,ill re2uirements3

organi1ation compensation and employee income

6 4i+estyle and compensation

7 *ay and %ocial Classes

8 4i+e %tyle and %ocial Classes

9 Conclusion

10 e+erence

5 .&O'/C&O.

0noledge is the basis of mu&h behavior: the sear&h for and e1ploitation of it have been at the

heart of so&ial and e&onomi& development for &enturies. 2et there are no &laims that radi&al

&hanges are afoot hi&h ill greatly in&rease the signifi&an&e of and alter the pattern of


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/noledge produ&tion, dissemination and use. 3ountries and organi4ations that understand this

and adapt to ta/e advantage of the enormous opportunities in prospe&t ill, it is argued, pla&e

themselves in strong positions to &ompete effe&tively in the global e&onomy. 50noledge

or/ers6 ill emerge as the dominant o&&upational group ith high levels of edu&ation,

&ontinuing professional development, and autonomy. hey ill be the first to &onne&t to the

evolving global &ommunity 7 many already are.

-o&ial e1&lusion o&&urs hen a so&iety fails to organi4e itself to ensure that all its members &an

parti&ipate. hose e1&luded suffer from a &umulative disadvantage hi&h goes ell beyond their

individual &hara&teristi&s and e1perien&e and e1tends to the lo&al &ommunities in hi&h they

live. here are personal, family and ider &olle&tive ingredients to the pro&ess of their e1&lusion.

hey ill be the last to 5get &onne&ted6 ele&troni&ally as ell as so&ially.

0noledge or/ers and the so&ially e1&luded seem destined to live in different orlds. But

here ill the rest of the population ho fall into neither group live and or/8 What are theme&hanisms by hi&h the /noledge9based s&enario might be molded to meet so&ial as ell as

e&onomi& ob(e&tives8 )o distin&tively different is this s&enario in any &ase8 )ave management

fad and &ommer&ial hype led to the &oining of a ne pseudo9intelle&tual &urren&y8 Are

governments &aught up in the global transmission of shallo thin/ing before having time to

absorb the lessons of the re&ent past8 f there really is something substantial amongst the

spe&ulation and rhetori&, ho does it alter the balan&e of (udgment about the feasibility and

desirability of presently debated poli&y options8

his paper e1plores some of the /ey issues raised by &onsidering the development of a

/noledge 9based; e&onomy or so&iety. he fo&us is mainly on its potential &onse


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relate to /noledge produ&tion and transfer, initial edu&ation and training, and &ontinuingprofessional development.

-e&tion @ turns to address the impli&ations of the /noledge e&onomy for the 5other orld6 ofso&ial e1&lusion, starting by elaborating hat is meant by so&ial e1&lusion and going on to see

ho the evolving /noledge e&onomy &ould ma/e it more diffi&ult to a&hieve the fre


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he &ompensation strategy does not &hange often as the &ompensation prin&iples &annot be

&hanged ithin fe days.

2.1 Compensation Strategy and HR Strategy

he &ompensation strategy is one of the main supporting do&uments for the )* -trategy. he

&ompensation strategy is &losely monitored by the management of the organi4ation and they as/

for the progress of the implementation of &ompensation strategy on the regular basis.

he )* -trategy has to be alays designed and developed ith )a8ing t)e respect to t)e

situation in t)e compensation area in the organi4ation. he )* -trategy &annot set the

ambition, hi&h is not suitable for the &ompany.

he )* -trategy alays defines the basi& prin&iples for the &ompensation s&heme in the

organi4ation and the &ompensation strategy defines the details for the &omponents and hen and

ho they ill be introdu&ed or redesigned.

he &ompensation strategy should be updated, hen )uman *esour&es ma/es signifi&ant

&hanges to the )* -trategy or the organi4ation &hanges its business strategy. he &ompensation

strategy has alays support the business and its selling &apabilities.

2.2 Compensation Strategy Importance

he &ompensation strategy helps the organi4ation to manage t)e personnel e9pensesof the

organi4ation and it sets &lear limits for the managers and employees. t provides the topmanagement ith the &ertainty, the personnel e1penses are under the &ontrol and the &osts ill

not boom.

he &ompensation strategy gives the &ertainty to the )* employees and )* managers as they

&an promise the stability in the &ompensation, the stability and the managed development of the

&ompensation &omponents and they &an e1plain the basi& role of the individual &ompensation

&omponents.

he &ompensation strategy a&ts as the basi& do&ument driving the &ompensation and benefits

pro&esses and defines &lear priorities for the development or redesign of the &ompensation&omponents.

6 Compensation %trategy mportance +or managers

he managers should be alays informed about the e1isten&e of the &ompensation strategy and

they should /no the implementation plan. he managers should not be alloed to &omment and
http://www.simplehrguide.com/hr-strategy.htmlhttp://www.simplehrguide.com/hr-strategy.html


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de&ide about the strategy as they ould tend to ma/e their lives easier and they ould ma/e the

personnel e1penses of the organi4ation to boom.

he managers are the users of the &ompensation poli&y and they should understand, it is based on

the approved prin&iples from the strategy. he &ompensation poli&y &an &hange on the regular

usually yearly; basis, but the strategy is &onsistent over a longer period of time and the

managers &an plan the &areer of the subordinates.

60 Compensation %trategy mportance +or employees

he &ompensation strategy is not intended to be read by the employees. he employees are the

users of the &ompensation poli&y and they should not be informed about the general position of

the organi4ation on the pay mar/et and the &ompensation &omponents to be used to motivate the

employees.

he employees &an read the &ompensation poli&y, hi&h des&ribes the details about their&ompensation as they re&al&ulate the salaries, but they should not read about the strategi&&ompensation &omponents, hi&h help to build the &ompetitive advantage of the organi4ation.

Capitalism and Knowledge in a Global Economy

n a &apitalisti& orld, employees must respe&t money and the &hallenges of their or/ to gainsatisfa&tion from or/ performed. he move of &apitalism into /noledge9based orld, &entersattention on an enlightened so&iety. o be su&&essful in a /noledge9based &apitalisti& orld,there must be a passion for learning that in&ludes re&ognition of the need for edu&ation. he main

issue here is in&reasing una&&eptable differen&es beteen in&ome of the and higher9paidmembers of so&iety. he groing disparity of in&ome beteen the loer9in&ome and higher9in&ome members of so&iety relates dire&tly to the in&reasing influen&e of higher levels of/noledge and s/ills in pay determination.

hose members of so&iety ho do not have an ade


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n the global e&onomy, or/ers are in&reasingly e1pe&ted to &ultivate an unpre&edented repertoire of

abilities in an immaterial orld of or/. his signifies a limited shift in &apitalist e1pansion in the post9

?lorist orld in relation to or/ers employability therein. A model of or/er sub(e&tivity as introdu&ed

into Western management and psy&hology dis&ourse surrounding employability in the !E#s and !E$#s.

n a developed, post9industrial global e&onomy, management has begun to vie or/ers less as &ogs in

the heel or less as rational and predi&table entities than as dynami& individuals ith the &apa&ity forsymboli& reasoning, intelligen&e, independently generated ideas, and even the desire to or/ for the sa/e

of self9fulfillmentF he ?lorist or/pla&e as e1pe&ted to be&ome a distant memory and organi4ations

ere to be&ome learning organi4ationsH rather than the hierar&hi&al, Di&/ensian or/ floors of the

manufa&turing age. Nevertheless, rather than offering freedom from the iron &age of &apitalism, or/ers

fa&e a &ontemporary form of &oer&ion that substitutes politi&al representation ith a set of e1pe&tations

and limitations intended, ironi&ally, to result in or/pla&e eman&ipation. =mphasis on employability of

individuals through or/ers &reation of self9oven safety nets demonstrates an elite9led pro(e&t to redu&e

government responsibility for employment elfare. n order to ma/e this &laim, the arti&le loo/s at the

&ase of edu&ation poli&y in -outh 0orea after the e&onomi& &risis of !EE$.

n an earlier part of the module e e1plored some of the prin&ipal developments in the&ontemporary business environment 7 or hat earlier referred to as the 5Apple e&onomy.6 ill

re&all that one of these developments is the huge importan&e of /noledge 7 or intangibles 7 in

this environment. ndeed, many &ommentators argue 7 hen e1ploring hat they refer to as the

5/noledge e&onomy,6 5/noledge &apitalism6 or 5&ognitive &apitalism6 7 that /noledge and its

management in the prin&ipal and most signifi&ant trend in this brave ne orld. )ere ant to

say a something about the development and &hara&teristi&s of /noledge &apitalism.

Many &ommentators have argued that over the last &ouple of de&ades in the developed orld

/noledge &apitalism has in&reasingly repla&ed industrial &apitalism. his perspe&tive is ably

summari4ed by Burton9Iones "##!; hen he rites:

5he balan&e of e&onomi& a&tivity is shifting from manufa&turing and produ&tion of physi&al

goods to information, /noledge a&&umulation, and the produ&tion of /noledge goods 7 or as

Negroponte put it, 5from atoms to bits6.6

)e therefore is advo&ating that e have moved from an era dominated by the manufa&turing of

things to a ne era dominated by the &reation and management of /noledge.

A&&ording to Jlssen and 'eters "##; the /noledge e&onomy differs from the traditional

e&onomy in several /ey respe&ts:

he e&onomi&s is not of s&ar&ity, but rather of abundan&e. Unli/e most resour&es that

deplete hen used, information and /noledge &an be shared, and a&tually gro through

appli&ation.

he effe&t of lo&ation is diminished. Using appropriate te&hnology and methods, virtual

mar/et pla&es and virtual organi4ations &an be &reated that offer benefits of speed and

agility, of round the &lo&/ operation and of global rea&h.
http://newtrendsinmanagement.wikispaces.com/Apple+economyhttp://newtrendsinmanagement.wikispaces.com/Knowledge+Managementhttp://newtrendsinmanagement.wikispaces.com/Apple+economyhttp://newtrendsinmanagement.wikispaces.com/Knowledge+Management


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Kas, barriers and ta1es are diffi&ult to apply on solely a national basis. 0noledge and

information 5lea/6 to here demand is highest and the barriers are loest.

0noledge enhan&ed produ&ts or servi&es &an &ommand pri&e premiums over

&omparable produ&ts ith lo embedded /noledge or /noledge intensity.

'ri&ing and value depends heavily on &onte1t. hus the same information or /noledge

&an have vastly different value to different people at different times.

0noledge hen lo&/ed into systems or pro&esses has higher inherent value than hen it

&an 5al/ out of the door6 in people6s heads.

)uman &apital 7 &ompeten&ies 7 is a /ey &omponent of value in a /noledge9based

&ompany, yet fe &ompanies report &ompeten&y levels in annual reports. n &ontrast,

donsi4ing is often seen as a positive 5&ost &utting6 measure.

A&&ording to &ommentators, this is a transition that is o&&urring in a huge number of different

se&tors 9 edu&ation, advertising, *LD, media, ar&hite&ture, selling, a&&ountan&y, ban/ing, la,

entertainments, the publi& se&tor, management and publishing. hus, /noledge management

a&&ounts for a very signifi&ant proportion of the ealth &reated in the U0 and other developed

&apitalist e&onomies.

Ket me give you (ust to &lear indi&ators of the emergen&e of /noledge &apitalism:

5 &)e s)i+t +rom brawn to brains

National employment statisti&s for the U0 and the other developed nations demonstrate a si4ableshift aay from manual and lo s/illed employment toards high9s/illed, high te&hnologyservi&e based employment. =ven in the manufa&turing se&tor, employment is no longer los/illed and re


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n a&&ountan&y, boo/ assets are those tangible resour&es of a business that appear on its balan&esheet, hereas its stealth assets are those intangible assets 7 su&h as, its brands, *LD s/ills,patents and intelle&tual property 7 that generally do not appear on its balan&e sheet. Anoteorthy trend for many businesses is that the si4e of their intangible stealth assets hasin&reased signifi&antly in &omparison to their tangible boo/ assets. his is tra&/ed by means of

5mar/et9to9boo/ ratios6 for businesses that &ompare their mar/et or real; values to their boo/values. ?or e1ample, this ratio for Mi&rosoft is something li/e !>, hi&h suggests that the truemar/et value of the business is thirteen times great than the value of its tangible assets. A ratherfamous statement made by Iohn -tuart the &o9founder of Oua/er Jats As &ited in 0otler, et al.,"##: ; helps to &hara&teri4e this: +f this business ere split up, ould give you the landand bri&/s and mortar, and ould /eep the brands and trademar/s, and ould fare better thanyou+.

thin/ it is reasonable to assume that it is largely different forms of /noledge or/ thatprodu&e these stealth assets and are responsible for in&reasing their value. -in&e these stealthassets are in&reasingly important for many businesses, this fa&t indi&ates the importan&e of

/noledge or/ to them.

Banglades): Economy

Although one of the orlds poorest and most densely populated &ountries, Bangladesh has madema(or strides to meet the food needs of its in&reasing population, through in&reased domesti&produ&tion augmented by imports. he land is devoted mainly to ri&e and (ute &ultivation,although heat produ&tion has in&reased in re&ent yearsP the &ountry is largely self9suffi&ient inri&e produ&tion. Nonetheless, an estimated !#Q to !Q of the population fa&es seriousnutritional ris/. Bangladeshs predominantly agri&ultural e&onomy depends heavily on an errati&monsoonal &y&le, ith periodi& flooding and drought. Although improving, infrastru&ture to

support transportation, &ommuni&ations, and poer supply is poorly developed. Bangladesh islimited in its reserves of &oal and oil, and its industrial base is ea/. he &ountrys mainendoments in&lude its vast human resour&e base, ri&h agri&ultural land, relatively abundantater, and substantial reserves of natural gas.

-in&e independen&e in !E$!, Bangladesh has re&eived more than R># billion in grant aid and loan&ommitments from foreign donors, about R! billion of hi&h has been disbursed. Ma(or donorsin&lude the World Ban/, the Asian Development Ban/, the UN Development 'rogram, theUnited -tates, Iapan, -audi Arabia, and est =uropean &ountries. Bangladesh histori&ally has runa large trade defi&it, finan&ed largely through aid re&eipts and remittan&es from or/ersoverseas. ?oreign reserves dropped mar/edly in "##! but stabili4ed in the R> billion to R@ billion

range or about > months import &over;. n Ianuary "##$, reserves stood at R>.$@ billion, andthey in&reased to R.>E billion by Ianuary "##%, a&&ording to the Ban/ of Bangladesh, the &entralban/. As of ?2 "##E, Bangladesh6s e&onomy as eathering the global e&onomi& &risis,groing some .EQ. =1ports dipped slightly, but the de&rease as modest &ompared to otherdeveloping nations. *emittan&es from overseas or/ers remained strong, though it as thoughtthat groth in remittan&es &ould slo folloing an apparent slodon in the numbers ofBangladesh or/ers going abroad. he United -tates is Bangladesh6s third9largest e1port


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mar/et, ith trade beteen the to nations rea&hing R@." billion in "##E. he e&onomy aspredi&ted to gro near Q in "#!#.

0 Mo8es &oward a Mar,et Economy

?olloing the violent events of !E$! during the fight for independen&e, Bangladesh99ith the help oflarge infusions of donor relief and development aid99sloly began to turn its attention to developing ne

industrial &apa&ity and rehabilitating its e&onomy. he stati& e&onomi& model adopted by its early

leadership, hoever99in&luding the nationali4ation of mu&h of the industrial se&tor99resulted in

ineffi&ien&y and e&onomi& stagnation. Beginning in late !E$, the government gradually gave greater

s&ope to private se&tor parti&ipation in the e&onomy, a pattern that has &ontinued. A fe state9oned

enterprises have been privati4ed, but many, in&luding ma(or portions of the ban/ing and (ute se&tors,

remain under government &ontrol. 'opulation groth, ineffi&ien&y in the publi& se&tor, resistan&e to

developing the &ountrys ri&hest natural resour&es, and limited &apital have all &ontinued to restri&t

e&onomi& groth.

n the mid9!E%#s, there ere en&ouraging, if halting, signs of progress. =&onomi& poli&ies aimed

at en&ouraging private enterprise and investment, denationali4ing publi& industries, reinstating

budgetary dis&ipline, and liberali4ing the import regime ere a&&elerated. ?rom !EE! to !EE>,

the government su&&essfully folloed an enhan&ed stru&tural ad(ustment fa&ility =-A?; ith

the nternational Monetary ?und M?; but failed to follo through on reforms in large part

be&ause of preo&&upation ith the governments domesti& politi&al troubles. n the late !EE#s the

governments e&onomi& poli&ies be&ame more entren&hed, and some of the early gains ere lost,

hi&h as highlighted by a pre&ipitous drop in foreign dire&t investment in "### and "##!. n

Iune "##> the M? approved >9year, R@E#9million plan as part of the 'overty *edu&tion and

Groth ?a&ility '*G?; for Bangladesh that aimed to support the governments e&onomi&

reform program up to "##. -eventy million dollars as made available immediately. n thesame vein the World Ban/ approved R> million in interest9free loans .

=fforts to a&hieve Bangladeshs ma&roe&onomi& goals have been problemati&. he privati4ation

of publi& se&tor industries has pro&eeded at a slo pa&e99due in part to or/er unrest in affe&ted

industries99although on Iune >#, "##", the government too/ a bold step as it &losed don the

Adam(ee Iute Mill, the &ountries largest and most &ostly state9oned enterprise. he government

also has proven unable to resist demands for age hi/es in government9oned industries. A&&ess

to &apital is impeded. -tate9oned ban/s, hi&h &ontrol about three9fourths of deposits and

loans, &arry &lassified loan burdens of about #Q.

he M? and World Ban/ predi&ted GD' groth over "#!#9"#! of about .#Q, ell short of

the %Q9EQ needed to lift Bangladesh out of its severe poverty. he initial impa&t of the end of


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se&tors have been in&reasingly frustrated ith the politi&s of &onfrontation, the level of

&orruption, and the slo pa&e of reform. nvestors vieed favorably steps ta/en by the interim

government to address &orruption, governan&e, and infrastru&ture issues, though most believed it

as too early to assess the long9term impa&t of those developments.

=Agriculture

Most Bangladeshis earn their living from agri&ulture. Although ri&e and (ute are the primary

&rops, mai4e and vegetables are assuming greater importan&e. Due to the e1pansion of irrigation

netor/s, some heat produ&ers have sit&hed to &ultivation of mai4e hi&h is used mostly as

poultry feed. ea is gron in the northeast. Be&ause of Bangladeshs fertile soil and normally

ample ater supply, ri&e &an be gron and harvested three times a year in many areas. Due to a

number of fa&tors, Bangladeshs labor9intensive agri&ulture has a&hieved steady in&reases in food

grain produ&tion despite the often unfavorable eather &onditions. hese in&lude better flood

&ontrol and irrigation, a generally more effi&ient use of fertili4ers, and the establishment of betterdistribution and rural &redit netor/s. With "%.% million metri& tons produ&ed in "##9"##

Iuly9Iune;, ri&e is Bangladeshs prin&ipal &rop. By &omparison, heat output in "##9"## as

E million metri& tons. 'opulation pressure &ontinues to pla&e a severe burden on produ&tive

&apa&ity, &reating a food defi&it, espe&ially of heat. ?oreign assistan&e and &ommer&ial imports

fill the gap. Underemployment remains a serious problem, and a groing &on&ern for

Bangladeshs agri&ultural se&tor ill be its ability to absorb additional manpoer. ?inding

alternative sour&es of employment ill &ontinue to be a daunting problem for future

governments, parti&ularly ith the in&reasing numbers of landless peasants ho already a&&ount

for about half the rural labor for&e.

! ndustry and n8estment

?ortunately for Bangladesh, many ne (obs99!.% million, mostly for omen99have been &reated

by the &ountrys dynami& private ready9made garment industry, hi&h gre at double9digit rates

through most of the !EE#s. he labor9intensive pro&ess of ship9brea/ing for s&rap has developed

to the point here it no meets most of Bangladeshs domesti& steel needs. Jther industries

in&lude sugar, tea, leather goods, nesprint, pharma&euti&al, and fertili4er produ&tion. he

&ountry has done less ell, hoever, in e1panding its e1port base99garments a&&ount for more

than three9fourths of all e1ports, darfing the &ountrys histori& &ash &rop, (ute, along ith

leather, shrimp, pharma&euti&als, and &erami&s.

Despite the &ountrys politi&ally motivated general stri/es, poor infrastru&ture, and ea/

finan&ial system, Bangladeshi entrepreneurs have shon themselves adept at &ompeting in the

global garments mar/etpla&e. Bangladesh e1ports signifi&ant amounts of garments and /nitear

to the U.-. and the =uropean Union =U; mar/et. As noted, the initial impa&t of the end of


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pressures, hoever, mean Bangladesh must &ontinue to &ut final delivered &osts if it is to remain

&ompetitive in the orld mar/et.

he Bangladesh Government &ontinues to &ourt foreign investment, something it did fairly ell

in the !EE#s in private poer generation and gas e1ploration and produ&tion, as ell as in other

se&tors su&h as &ellular telephony, te1tiles, and pharma&euti&als. n !E%E, the same year it signed

a bilateral investment treaty ith the United -tates, it established a board of investment to

simplify approval and start9up pro&edures for foreign investors, although in pra&ti&e the board

has done little to in&rease investment. Bangladesh also has established e1port pro&essing 4ones in

3hittagong !E%>;, Dha/a !EE@;, 3omilla "###;, Mongla "##!;, sardi "##;, Uttara

"##;, and 0arnafully "##$;.

he most important reforms Bangladesh should ma/e to be able to &ompete in a global e&onomy

are to privati4e state9oned enterprises -J=s;, deregulate and promote foreign investment in

high9potential industries li/e energy and tele&ommuni&ations, and ta/e de&isive steps toard&ombating &orruption and strengthening rule of la.

3.7 Problems with the Bangladesh !nowledge "conomy#

he term 5/noledge e&onomy6 refers to the overall e&onomi& stru&ture that is present and yet

still emerging in the Bangladesh. he report argues that there is need for a more in depth analysis

of the Bangladesh /noledge e&onomy.

he riters suggest that an in depth analysis is needed hi&h loo/s &losely at regions and their

&urrent /noledge and s/ills level, rather than a holisti& vie. As a result poli&ies and

pro&edures implemented by the government &an be adapted for spe&ifi& areas of the BangladeshH

Department of rade L ndustry, "#!!;. his is be&ause a poli&y may sho statisti&al eviden&e

that it is su&&essful in one area of the Bangladesh. )oever in another area the poli&y may have

yielded small gains and been largely unsu&&essful. ailoring poli&ies and pro&edures to spe&ifi&

regions ill then yield an in&rease in s/ills and /noledge that is available to organi4ations.

0 Compensation and Organi1ational %trategy

3ompensation, in its broadest sense 9 the perspe&tive that managers must ta/e in the globale&onomy 7 is at the very heart of every organi4ation6s performan&e potential. 3ompensationprovides the point at hi&h organi4ational and individual priorities and goals meet, en&ouragingthe &ontentment of both parties. t provides the driving for&e for effe&tively attra&ting neededhuman talent, retaining that talent and en&ouraging the talent in enduring persistent, enviable andenhan&ed performan&e.


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While developing the global &ompensation and benefit &omposition, )* must deal ith manyfa&tors that are not present in a domesti& environment. n this arti&le, e ill dis&uss about someof those fa&tors that unservingly impa&ts global &ompensation and benefits strategies andgeneral insinuation of those fa&tors on )* professionals.

Developing suitable &ompensation poli&ies to meet organi4ational strategies, hile effi&ientlya&&ommodating different types of employment terms and &onditions, poses many distin&tive&hallenges for global )* pra&titioners, su&h as:

!. Dealing ith diverse standards and &osts of living and multiple &urren&ies, e1&hange rates,inflationdeflation rates, ta1 systems and ta1 rates.

". Maintaining the suitable balan&e beteen global &onsisten&y and lo&al signifi&an&e.

>. Addressing organi4ational business &hanges e1pansions, mergers and a&


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he &ompetitiveness of the &ompensation is another important &ompensation de&ision. heorgani4ation &an de&ide to be aggressive ith the &ompensation strategy and it &an set theaggressive position on the pay mar/et, but this strategy is e1tremely e1pensive for theorgani4ation and it has to balan&e it ith high margin on the produ&ts and servi&es.

Jn the other hand, the organi4ation &an &hoose to offer the &areer and developmentopportunities, it &an in&rease the responsibilities of the individual employees and it &an balan&eaim to the loer level of the &ompensation on the pay mar/et.

he de&ision about the &ompetitiveness of the &ompensation strategy is e1tremely important as ithas a huge impa&t on the &osts of the organi4ation and it re


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he personnel development department &an also benefit from s/ill management SBlandin "##>.

he system ma/es the


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status in an une *ay and %ocial Classes

ypi&ally, today so&iety is divided into three &lassesCupper, middle and loer. ?rom the danof &ivili4ation, humanity has been divided into at least to so&ial &lasses C)AV=- and )AV=

NJ-.

As families merged into tribes and tribes merged into governments, a small, insignifi&ant so&ial

&lass emerged beteen the haves and the have9nots. Most members of these middle groups ere

government administrators, military offi&ers, artists, entertainers, traders, and mer&hants. During

the past five hundred years this middle so&ial group moved from minority to a ma(ority. oday, it

is important to re&ogni4e the relationship among pay, earnings and in&ome, and so&ial stru&ture

ithin the &ountry. oday one &riterion &an be used to determine the &lass of an individual or

family unit, that is N3JM=. his results in a typi&al upper9, middle9, and loer9&lass division

&an be further separated into seven subsets. =a&h of these subsets defines signifi&antly different

standards of living based on family in&ome.

? 4i+e %tyle and %ocial Classes

o appre&iate the importan&e of employer9provided pay, it is ne&essary to have an understanding

of the lifestyle and standard of living di&tated by pay, earnings, and in&ome. Ket6s understand

this &on&ept in the light of different &lasses:

$.1 %he Po&erty Class'

hose ho, unfortunately, are members of the loest in&ome group are not en(oying the good

lifeH available to ma(ority. Most of the people in this in&ome group do not have a full9time (obs.

A large number of the individuals are illiterate and are s&hool drop outs. )ousing is a &riti&al

problem for this group. t is not unusual for families of this group to spend from " to # Q of

their in&ome on rent and utilities.

$.2 %he (or)ing Poor'

Jne feeble and fragile step aay from &omplete destitution are the or/ing poor. Many of these

individuals hold part9 and full9time (obs that pay a age e


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$.3 *ower+,iddle Class'

Koer9middle &lass families do not have the lu1ury of asting their money. When loer9middle

&lass individuals spend their earnings on frivolous pastimes, they are only one short step aay

from returning to the loer9in&ome &lass. hey have little to no savings and any /ind of finan&ial

problem &an be disastrous. A ma(or finan&ial problem is loss of (ob. Without the earnings&oming from one of the (obs, a to9age earner, four member9families &an be&ome destitute


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$.7 %he ltra+rich'

Not a ee/ goes by that the daily nespapers or television do not inform orld of the pay of ri&h

and famous. Going into the detail of lifestyle of ultra9ri&h people is beyond the purvie of this

post.

# Conclusions

0noledge e&onomy is &hallenging pre&isely be&ause the &ommodity it rests on 7 /noledge 7is itself hard to pin don ith any pre&ision. 'erhaps for this reason there are fe definitions thatgo mu&h beyond the general and hardly any that des&ribe the /noledge e&onomy in ays thatmight allo it to be measured and


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compensation in a knowledge-based global economy

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