In a competitive job market, companies decide how much to pay their workers based on a few important factors. The main factor is the balance between how many people want to work and how many workers companies need. Here’s a simple breakdown:

1. Supply and Demand for Workers:

   • Supply: This means how many people are willing to work at different pay rates. When pay is high, more people might want to take a job.
   • Demand: This is about how many workers companies need. If a company is growing and needs more help, the demand for workers goes up.

2. Extra Value of Hiring (MPL):

   • Companies look at how much extra work a new employee can do, which is known as the MPL. They will keep hiring as long as the extra output they get from a worker is worth the pay they offer. For example, if one worker makes 10 extra products that can sell for $15 each, that worker's value is$150. If the company pays less than this amount, they are likely to hire more workers.

3. Finding Balance in the Market:

   • In a competitive job market, pay will change until the number of workers looking for jobs matches the number of jobs available. If pay is too high, companies might hire fewer people. If pay is too low, some workers might quit, which can lead to higher pay.

In short, companies in a competitive job market decide how much to pay based on how many people want to work, how much extra work they can get from hiring, and the need to stay competitive while making money.