Academic journal article Monthly Labor Review

Wage Differences among Workers in the Same Job and Establishment

Academic journal article Monthly Labor Review

Wage Differences among Workers in the Same Job and Establishment

Article excerpt

Establishments employing two workers or more in an occupation often pay these workers at different rates. How frequent is such pay variation? How wide is the resulting spread in rates? Does the degree of pay dispersion differ by occupation? This article explores these issues using data collected in the Bureau of Labor Statistics' 1983 Area Wage Survey program. Where an establishment had two workers or more in a job, the percent by which the salary of the highest paid incumbent exceeded that of the lowest paid incumbent was calculated. Percentage differences for individual establishments were then averaged over all establishments providing such comparisons.

Rate structures were clearly different for white- and blue-collar workers. More than three-fourths of the workers employed in the 40 white-collar occupations studied were in establishment paying more than one rate for their job. Fewer than half of the workers in the 28 blue-collar occupations studied were employed in multi-rate situations. The remainder were either the only incumbents in the job or were paid at the same rate as the other incumbents of the job.

Among workers employed in establishments paying more than one rate for a job, the pattern was again different for white- and blue-collar occupations. Average wage spreads between highest and lowest paid workers in the white-collar occupations studied ranged from 17 percent for industrial nurses to 42 percent for intermediate electronics technicians. For the 12 skilled maintenance occupations, average wage spreads for all but two were betwee 7 and 14 percent. Among unskilled plant occupations, ranges were as small as 13 percent for power-truck operators (other than forklift) and as large as 45 percent for lower level guards.

These differing structures reflect differences in pay systems in U.S. industry. Employers commonly adopt formal pay systems, establishing either a single rate for a job classification or a range of rates in which the minimum, maximum, or both of these rates are specified. Pay of individual workers within a specified range depends on performance (merit), length of service, or both. In the absence of a formal pay systems, rates in a given job are determined largely by the employer's appraisal of individual workers. Data are not available from the Area Wage Survey program to distinguish between the effects of formal and informal systems.

Pay spreads among workers in the same job and establishment cannot be determined from the pay variations typically published in occupational wage survey reports. Because of differences in pay levels among employers, industries, and localities, these reports show considerably wider ranges of pay rates in a job than would be expected in a single establishment. It is not unusual for BLS area wage surveys covering a variety of industries to find the highest paid worker in an occupation earning twice as much as the lowest paid. In nationwide studies, the highest paid worker may earn more than three times as much as the lowest paid. In contrast, the average pay spreads found in this study ranged from 7 to 45 percent.

Information on pay spreads within establishment can be used for a variety of purposes. For example, it is important to those establishing and administering rate-range pay plans. It is also useful in analyzing wage structures in that it helps to explain overall patterns of pay differentials. In addition, it indicates the extent to which pay may be increased without promotion to another job.

Computing wage differences

Information for this review of pay spreads within the same job and establishment comes from data collected in more than 11,200 establishments located in 70 metropolitan areas throughout the country. For Each of 68 BLS occupational classifications surveyed in 1983, the percent by which the highest rate paid exceeded the lowest rate was calculated where an establishment employed two workers or more at different rates. …

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