Pay Equality and Industrial Politics

  title={Pay Equality and Industrial Politics},
  author={Edward P. Lazear},
  journal={Journal of Political Economy},
  pages={561 - 580}
  • E. Lazear
  • Published 1 June 1989
  • Economics
  • Journal of Political Economy
Personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers. But it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme. However, when workers' rewards are based on relative comparisons, salary compression reduces uncooperative behavior that is detrimental to the firm. Relative comparisons imply that some reference group must be… 
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