Final answer:
Pay grades are categories used to organize jobs of similar value, with a given pay range for each grade. The U.S. Federal General Schedule is an example of such a system, aligning pay with job requirements including education and experience. Wages in the private sector are also influenced by skill levels and market supply and demand.
Step-by-step explanation:
The concept described in the student's question is pay grades, which are used to group jobs that have approximately the same relative internal or external worth and are paid at the same rate or within the same pay range. In the context of U.S. civil service, this is exemplified by the Federal General Schedule, which was established to ensure fair and equitable compensation for government employees based on their responsibilities, skills, and qualifications. That schedule includes fifteen grades, wherein each grade has ten steps to account for ascending levels of education, experience, and skill - reflecting the different requirements for various civil service positions.
For instance, grades GS-1 and GS-2, which require very little education or experience, offer lower pay. Conversely, higher grades, such as GS-13 through GS-15, demand specialized experience and education, resulting in higher compensation. As employees gain experience or enhance their qualifications, they may move up through 'steps' within a grade or advance to higher grades, indicating an internal structure for progression and pay increases based on merit.
Wages in the broader economy operate similarly; they are typically influenced by the level of skill, education, and experience that an individual possesses, as well as the current supply and demand dynamics for those abilities in the labor market. Hence, external markets heavily influence how organizations, including those in the public sector, structure their compensation strategies to remain competitive and fair.