Factors That Determine Wages

Factors That Determine Wages
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All wages are not created equal. Of course, occupation is the largest determinant of wage; everybody knows that doctors are paid far more than food service workers. However, there are other factors that affect wages across many different types of occupations. These include such basic factors as location, education and experience.

States and Regions

The area of the country in which you live has a lot to do with your likely wage. Some areas of the country simply offer more pay. For example, the Bureau of Business and Economic Research found as of 2011 that workers in more-prosperous states reported average annual wages. In New York, average wage was $61,042; in Connecticut, it was $60,138; and it was $58,620 in Massachusetts. Workers in less-prosperous states reported significantly lower average annual wages. For example, workers in Mississippi averaged $35,951 per year, while those in Montana averaged $35,814. In general, wages tend to be higher in the Northeast and Far West, and lower in the South and Midwest.

Urban and Rural Pay Scales

While the cost of living tends to be higher in metropolitan regions, wages also tend to be higher. For example, a study conducted by the Southern Rural Sociological Association found that workers living in metropolitan areas earned a median annual income of $42,000 in 2009, compared with just $35,070 among workers living in nonmetropolitan areas. Similarly, a 2011 study found that Oregonians living in nonmetropolitan areas earned an average annual income of $31,383, compared to $39,267 among those who worked in metropolitan areas of the state.


Education level can make a very significant difference when it comes to wages. According to data released by the Bureau of Labor Statistics, workers who never got a high school diploma earned a median weekly wage of $492 in the second quarter of 2014. By comparison, those who had graduated high school earned a median weekly wage of $666. Workers who held a bachelor's degree earned a median wage of $1,098 per week, while those with an advanced degree had a median weekly wage of $1,377.


Across most types of occupations, workers receive higher wages as they gain skills and experience. For example, a 2013 survey conducted by the American Society of Mechanical Engineers found that engineers received an average annual wage of $55,000 during their first year on the job. That average annual wage jumped to $94,035 among engineers with between 10 and 14 years of experience, while those with 25 or more years of engineering experience earned an average of $130,000 annually.