Let’s now look at the administration of base salaries. In the abstract, there are two ways to do it. At one extreme, the dollar level is determined by experience only; at the other, by merit alone. In the experience-only approach, an employee’s salary increases with the time he has spent in a particular position. A key point here is that any job has a maximum value; no matter how long an individual has been in it, his salary ultimately has to level off, as shown in the figure on the next page. In the merit-only approach, salary is independent of the time spent in the job.
