Final answer:
External equity in an organization refers to the state where compensation levels and benefits are on par with those offered by other competing entities in the same labor market, ensuring competitive and fair pay to attract and retain skilled employees.
Step-by-step explanation:
The scenario you're describing refers to external equity, which is a situation in which an organization's compensation levels and benefits are comparable to those of other entities within the same labor market and competing for the same employees. Guaranteeing external equity ensures that businesses are able to attract and retain talent, particularly when skills are in high demand. The principles of the labor market such as the supply and demand of workers help in determining the equilibrium wage, which then informs the compensation strategy of an organization.
Organizations strive for external equity to prevent employees from leaving for competitors offering better pay for similar positions. It involves balancing wages, taking into account factors such as education, skill levels, and experience to maintain fairness and competitiveness. This concept aligns with doctrines like equal pay for equal work and comparable worth, advocating that compensation should be equivalent for jobs requiring similar responsibilities, skills, and effort, regardless of the job's nature or the employee's gender.