How New Is the "New Employment Contract"? Evidence from North American Pay Practices

By David I. Levine; Dale Belman et al. | Go to book overview

Appendix C
The Cleveland Community Salary Survey

We used data from 1956 through 1996 that was gathered in the annual Community Salary Survey (CSS) conducted by the Federal Reserve Bank of Cleveland personnel department. The department uses the survey, which covers employers in Cleveland, Cincinnati, and Pittsburgh, to formulate its yearly salary budget proposal. In return for their participation, surveyed companies receive the results for their own use. Salary surveys such as the CSS currently offer the only longitudinal microdata on wages that include both detailed occupation and employer identity information.

Out analysis was subject to several limitations. First, we measure employer wage levels relative to the market means measured within CSS sample. To the extent that all CSS employers are large and pay above-market wages, our measure of employer wage levels will understate the true employer wage effect.1 Moreover, this approach will misstate trends in average employer wage effects relative to the entire market if the CSS sample has diverged from similar companies.

We have no reason to believe that the bias from this omission has changed over time. Some indirect evidence suggests that the bias will be small. As noted above, government and large employers’ share of jobs is large and has remained relatively constant. In addition, essentially all large employers participate in wage surveys such as the one we analyze (Lichty 1991; Belcher, Ferris, and O’Neill 1985). Finally, Appendix D presents evidence CSS participants are representative of similar large employers in terms of sales growth, and other measures, and their employees are similar to employees in the CPS.

Second, our measures of relative wages move when companies’ workforce compositions change (for example, due to hires and promotions of particularly skilled or unskilled employees). Such compositional changes within an occupation add noise to our measures. More seriously, our measure will overstate the effect of structures if companies keep rigid differentials between a junior and senior occupation within a job ladder but have increased the variance in the time spend in the junior occupation. Similar problems occur if employers overcome rigidities by granting workers inflated occupational titles.

Third, our data do not contain information on noncash compensation. There is some evidence that noncash benefits such as employee stock ownership and stock options are increasingly distributed to non-executives (Lawler, Mohrman, and Ledford 1995). Such a trend would bias some of our estimated changes over time. At the same time, most plans distribute relatively little

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