Market-Based Pay in Action

The practice of linking the pay of public sector employees to the prevailing labor market, or market-based pay, has been a topic of conversation in many municipalities across the nation. Although much has been written about the use of this pay philosophy, little has been written about the use of market-based pay in local government settings. This article presents the results of in-depth interviews about the use of market-based pay with the human resource directors in the seven Hampton Roads, Virginia, cities. The authors find that although the idea of a market-based pay system is alluring, the difficulties of balancing internal and external equity, political considerations, and economic barriers make full implementation of such a system difficult at best.