What are some factors affecting pay increases?

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There are a number of factors that can affect pay increases.  Among them are:

  • Supply and demand.  The greater the demand for workers compared to the supply, the more the workers' wages will go up.
  • Unions.  Unions can at times negotiate contracts that call for automatic wage increases each year.  These raises can occur even if demand for labor is not strong.
  • Productivity.  The more productive workers are, the more money they can make for their employers.  According to economic theory, this will result in pay increases as the employers pay them for the value they add.
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