Final answer:
Organizations consult market data, industry standards, and their own compensation philosophies to decide on pay levels, considering factors like competencies, education, and market demand.
Step-by-step explanation:
When deciding on specific pay levels, organizations often consult various sources of information such as market pay data, industry standard rates, and the organization's compensation philosophy and strategy. They take into account the required competencies, education, and skill level for various positions within the organization, as well as the overall market demand for certain roles.
Additionally, factors like the General Schedule for civil servants in the U.S. Federal system can provide a structured approach to determining pay levels, which is based on competencies and education required for different grades. Wages are also influenced by supply and demand, skills scarcity, educational attainment, and talents in the workforce.
Labor market theories such as the winner-take-all labor market theory can also provide insight into pay disparities, especially among top earners in various professions.