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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Has Compensation Become More Flexible?
Sandra A. Cannon, Bruce C. Fallick, Michael Lettau, and Raven Saks

Abstract: In recent years, numerous observers have argued that global competition, increased reliance on contingent workers, and the breakdown of implicit contracts have made compensation practices in the United States more flexible; in particular, employers have become more concerned with how an employee's pay compares to that in other firms and less concerned with considerations of equity or relative pay within the firm. This paper uses establishment-level data from the Bureau of Labor Statistics' Employment Cost Index program to examine this claim by asking whether the variances of compensation within and between establishments have moved in a more "flexible" direction over the 1980s and 1990s. We find evidence consistent with increased flexibility.

Keywords: Wage inequality, wage compression, pay equity

Full paper (568 KB PDF)

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Last update: May 31, 2000