What question did this study set out to answer?

Determine whether compressed salary structures are economically efficient when worker morale and incentives depend on relative pay comparisons.

June 1, 1989Journal of Political Economy

Pay Equality and Industrial Politics

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Authors

ELEdward P. LazearStanford University

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Implication

Theoretical model demonstrates that wage compression reduces uncooperative behavior in relative reward systems, indicating that pay equality within reference groups enhances firm efficiency.

Key Points

Determine whether compressed salary structures are economically efficient when worker morale and incentives depend on relative pay comparisons.
Formulated an economic theoretical framework analyzing employee incentives, compensation equity, and reference group selection within firms.
Modeled the strategic trade-off between the disincentives of wage compression for high-ability workers and the reduction of counterproductive, uncooperative behavior among peers.
Demonstrated that wage compression directly curtails detrimental, uncooperative behavior when compensation systems evaluate workers based on relative performance comparisons.
Established that establishing some degree of wage compression within designated reference groups is economically efficient for the firm.

Cite This Study

Edward P. Lazear (1989) studied this question.

synapsesocial.com/papers/6a193c5af3c200df105813bb https://doi.org/10.1086/261616

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Implication

Theoretical model demonstrates that wage compression reduces uncooperative behavior in relative reward systems, indicating that pay equality within reference groups enhances firm efficiency.

Pay Equality and Industrial Politics

Discussion

Member takes

Implication

Key Points

Cite This Study

Pay Equality and Industrial Politics

Discussion

Member takes

Implication

Key Points

Cite This Study

Also Consider

Also Consider