Upon a review of the wage rate and structure pertaining to its regular rank and file employees, K Corporation found it necessary to increase its hiring rates for employees belonging to the different job classification levels to make their salary rates more competitive in the labor market.
After the implementation of the new hiring salary, Union X, the exclusive bargaining agent of the rank and file employees, demanded a similar salary adjustment for the old employees. It argued that the increase in hiring rates resulted in wage distortion since it erased the wage gap between the new and old employees. In other words, new employees would enjoy almost the same salary rates as K Corporation’s old employees.
(a) What is wage distortion? (2%)
(b) Did a wage distortion arise under the circumstances which legally obligated K Corporation to rectify the wages of its old employees? Explain. (3%)
(a) Wage distortion – refers to a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effecti...
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