Academic journal article Public Personnel Management

Pay Compression at Public Universities: The Business School Experience

Academic journal article Public Personnel Management

Pay Compression at Public Universities: The Business School Experience

Article excerpt

Pay compression, the narrowing over time of the pay differentials between peopl in the same job or between people in different (usually adjacent) jobs in an organizational hierarchy, has become a significant issue in public higher education over the past decade. In 1986, Howard Bowen and Jack Schuster identified a widening of the salary differentials between disciplines and disproportionate salary increases at the lower ranks as a major negative influence on faculty morale(1). The academic labor market, with its differentiation of individuals by rank and segregation of academic disciplines with differing market supply and demand characteristics, provides an excellent opportunity to study pay compression.

The reaction of individuals to pay compression is based upon subjective perceptions of equity. Most definitions of pay compression in the literature capture only this perceptual facet of the construct, ignoring or downplaying th objective nature of narrowing pay differentials over time that can lead to perceptions of inequity(2,3). Interestingly, pay compression can be perceived t exist even when there is no objective basis for the perception. However, perceived pay compression is more likely to result in organizations that are, i fact, experiencing the objective narrowing of pay differentials over time.

Three possible pay compression scenarios can result: (1) objective pay compression exists in conjunction with subjective (or perceived) pay compression, (2) objective pay compression exists without subjective pay compression, or (3) objective pay compression does not exist, but subjective pa compression occurs. In the first case, objective pay compression leads to the subjective perception of pay compression (i.e., pay inequity). This is most likely to occur in organizations where employees have access to salary data (e.g., public institutions). In the second case, objective pay compression does not lead to subjective pay compression. While objective pay compression exists, employees either are not aware of it (most likely in secret pay systems) or do not perceive it to be inequitable. The third case illustrates a perceptual inequity that is not correlated with an objective inequity, which is most likel to occur in secret pay systems, but may occur even when employees are aware of others' salaries. It may represent a reaction to other organizational characteristics in addition to the pay system.

To complicate matters, pay compression is not necessarily a "problem", any more than turnover is necessarily a "problem". That is, pay compression does not necessarily produce undesirable organizational consequences. All of this suggests that pay compression is a much more complex phenomenon than is typically described in compensation textbooks. It has both objective and subjective components, and can have either positive or negative consequences fo an organization, depending upon the particular situational/contextual variables that exist. Since objective pay compression may not have a direct and immediate effect on organizational behaviors and attitudes, it is useful to observe patterns of compression over time and across occupations.

Pay compression in academia

In the academic labor market, the causes of "objective" pay compression seem fairly well-defined - demand/supply imbalances in some disciplines produce ever-increasing salary offers that often outstrip the merit increases that universities can offer their current faculty. This seems to be confirmed by a 1990 survey of senior administrators at 364 colleges and universities(4) conducted by the American Council on Education which indicates that colleges an universities are experiencing greater difficulty in hiring for faculty positions, although mainly in a few fields and specialties. Sixty-three percent of the institutions reported having greater difficulty than in the past in getting top applicants to accept positions offered to them (in 1987 only twenty-five percent responded in this manner). …

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