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ETHICAL ISSUES IN THE PROCESS OF

DETERMINING FAIR PRICE AND JUST WAGE

PRICE
Is the amount an ordinary customer pays
goods for he has purchased or for
services rendered to him.

WAGE
Is the principal means for satisfying the
basic needs of worker and the worker’s
family.

THE PROCESS OF DETERMINING FAIR PRICE


ETHICAL CONSIDERATION IN PRICING

A. Price theories
 Man is entitled to enjoy the fruits of his labor and may therefore establish any price he pleases for the goods he has produced.
 Price depends on the law of supply and demand. The more the supply, the less the price and the less supply, the higher the price.

B. Methods of Determining Fair Price


1. Fair Price Related to Fair return
In order to have a fair return, a company must have its profit equal to the average profit in the same industry for the same amount of capital and
total resources used.
In determining fair return, the value of the capital on which the return is based must be established. Two commonly used bases are: (a) equity
or capital and (b) total value of assets used.
2. Price in Fixed Price System is Fair Price
In affixed price system, seller is expected to establish the lowest price for his goods and the customer is in turn expected to take or leave them
at the price quoted.
A fixed price system has the following requirements:
 The seller must give his final price.
 The fixed price should be the same for all buyers.
Fixed price does not mean charging the same price in different localities. It just means that the same price for a particular product is charged
for all buyers in each store.
3. A Bargaining or Movable Price System
The basis of bargaining is the attempt to sell or buy from another businessman in terms favorable to one’s self. In bargaining, the seller usually
names a price that is two or four times as high as he would be willing to accept.
4. Bidding
To get the approximate of a fair price, some businessmen resort to bidding. Here, bidders are expected to name their final price, which is
minimum they are willing to accept.

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C. Price Practices
1. Varying Price Policy

The price varies with each buyer, depending whether he is a favored customer or he has bargaining
ability. This is unethical because the favored buyer is given an advantage over the others.

2. Follow-the Leader Pricing


TRIVIA
A technique that takes advantage of the average customer’s impression that high price indicates high TRIVIA
quality that is pricing goods at almost the same level as the better known and better quality products even if they In 1935, President Franklin Roosevelt
could be sold at a lower price. proposed the first federal minimum
wage under his National Recovery Act.
3. Odd Price Policy This act called for a minimum wage of
25 cents per hour. The Supreme Court
struck down the National Recovery
A practice that uses odd numbered prices such as P 8.97 instead of using whole numbers such as Act as unconstitutional, rendering the
P9.00 making the customer believe that he is buying goods at a cheaper price. minimum wage unenforceable. In
1938, the Fair Labor Standards Act
reinstated the same 25 cent federal
4. Loss Leader Pricing minimum wage, along with the legal
mechanisms necessary to adjust it
This makes the customer believe that all articles being sold in the store are on sale. This pricing over time.
quotes some well known items at a lower price while other goods at a regular price.
COUNTRIES WITH HIGH
The Process of Determining Fair Wage MINIMUM WAGE

THE PROBLEM OF FAIR WAGE  Switzerland – $15,457 per


year
The administrators have great difficulty in determining fair wage in times of inflation. The labor unions The minimum salary of skilled workers
ranges from 2,800 to 5,300 Swiss francs,
clamor for high wages to compensate for price increases. It is the policy of the state to encourage free trade while that of unskilled workers may be
unionism and free collective bargaining. Workers shall have the right to engage in concerted activities for anywhere between 2,200 to 4,200 Swiss
francs.
purposes of collective bargaining or for their mutual benefit and protection.  San Marino – $15,707 per
year
The administrators think that the labor union members are still not getting enough compensation for a San Marino’s working population earns a
decent standard of living or not getting fair wages. minimum of €7.04 per hour
 New Zealand – $16,462
A. Factors to Consider in Establishing Just Wages per year
New Zealand enacted a law in April of
2012, mandating that workers who are in
Under Sec. 19 in wages studies and determination of the Labor Code of the Philippines, the wage order shall training and those who are between 16 to
specify the industry or branch to which the minimum wages prescribed therein shall apply. Provided,, that no 17 years old get a minimum wage of
NZ$10.80 per hour. The amount increases
definite rates shall be prescribed for specific job titles in the industry. once a worker reaches 18 years of age,
with the minimum wage for the higher
Moreover, under Sec. 6 of Administration and Enforcement of the Labor Code of the Philippines, bracket at NZ$13.50 per hour.
 Canada – $16,710 per year
every employer shall pay his employees by means of payroll wherein the (1) length of time to be paid, (2) the The minimum wage in Canada depends on
rate of pay per month, week, day or hours, (3) the amount due for overtime work (5) deductions made from the province or territory where one is
based. But generally, the amount ranges
the wages of the employees and (6) amount actually paid, must be shown. from C$9.50 to C$11 per hour.
 France – $17,108 per year
The fairness of an employee’s wage depends on whether the wage-setter considered the following factors: France has a relatively detailed law for its
workers with regards to amount of money
1. The going wage in the industry and the area earned and time served. The minimum
wage is €9.40 per hour, which translates to
€1,425.67 per month.
Although labor markets in an industry or an area may be manipulated or distorted (e.g., by job  United Kingdom –
shortages), they generally provide at least rough indicators of fair wages if they are competitive and if we $18,428.24 per year
assume competitive markets are just. In addition, the cost of living in the area must be taken into account if Those who are below 18 years old and
who have finished compulsory
employees are ti be provided with an income adequate to their families’ needs. education must be paid a minimum of
£3.68 per hour. Those between the
2. The firm’s capabilities ages of 18 to 20 years old must be
paid a minimum wage of £4.98 per
In general, the higher the firm’s profits, the more it can and should pay its workers; the smaller its hour. Once a person reaches 21 years
old, his minimum wage should
profits, the less it can afford. Taking advantage of cheap labor in captive markets when a company is perfectly increase to £6.19 per hour.
capable of paying higher wages is exploitation.  Belgium – $18,813 per
year
3. The nature of the job For those who are 21 years old, the
minimum wage is €1,501.82 .
Jobs that involve greater health risks, offer less security, require more training or experience, impose

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heavier physical or emotional burdens, or take greater effort should carry higher levels of compensation.

4. Minimum wage laws


The minimum wages required by law set a floor for wages. In most circumstances, wages that fall beneath this floor are unfair.
5. Relation to other salaries
If the salary structure within an organization is to be fair, workers who do roughly similar work should receive roughly similar
salaries.
6. The fairness of wage negotiations
Salaries and wages that result from “unfree” negotiations in which one side uses fraud, power, ignorance, deceit, or passion to get its
way will rarely be fair.
7. Local cost of living
Wages should be sufficient to enable a family of four to meet their basic need, even if such wages would be above the minimum wage.

B. Method by Which wages are established


1. Determined unilaterally by the owner of the business.
2. Through discussion between the employee and his boss.
3. Through collective bargaining agreements.
4. Through job evaluation and merit increases.
C. Practices That Deny the Practice of Just Wage
1. Asking the employee to saign a payroll that he is being paid a fair wage but he actually receives less than what is stated in the
payroll sheet.
2. Asking the employee to work a full day but securing his agreement that he be paid only for a half day’s work.
3. Requiring him to work on a holiday but paying him only the pay for a regular day.
4. Agreeing to advance the employee’s wage in kind but the goods that the employee receives in lieu of his advance wage are
priced at least 50% higher than regular prices.

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