Wage setting refers to the process by which employers determine the pay rates for their employees. This process can be influenced by various factors, including the cost of living, the demand for specific skills, and the overall economic conditions. Employers often consider industry standards and competitor wages to remain attractive to potential employees. Additionally, wage setting can be affected by government regulations, such as minimum wage laws and labor agreements. Organizations may also use performance evaluations and employee experience to adjust wages. Ultimately, effective wage setting aims to balance fair compensation with the financial sustainability of the business.