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February 2008, Vol. 131, No. 2

How widely do wages vary within jobs in the same establishment?

Krista Sunday and Jordan Pfuntner

Wages in the United States vary widely. A full-time counter attendant in a fast-food restaurant may earn the Federal minimum wage of $5.85 per hour, or $12,200 a year, while the chief executive officer of a major corporation may command an annual salary of $10 million. Analysts have studied this phenomenon extensively and identified a number of factors that affect wage rates. Factors such as occupation and the industry, geographic location, unionization, size, and ownership (private industry or government) of the establishment have been examined, as have individual characteristics such as the employee’s knowledge and skills, tenure, performance, and sex. Most of these studies have focused on wage differences across occupations and establishments, and have illuminated the role that the various factors play in explaining why certain jobs pay more than other jobs.1 Wages also can vary dramatically within a single occupation. For example, in 2004, 10 percent of computer programmers earned $17.19 per hour or less, whereas the top 10 percent earned $42.07 per hour or more.2

A different question asks, How do wages vary among workers in the same job within the same establishment? Are wages widely dispersed, or do they tend to be similar for all workers in the job? Finally, the question is posed, Has the dispersion of wages within establishment jobs changed over the last quarter century? These questions are more difficult for researchers to tackle, because data sources are generally less conducive to studies within establishments. In order to answer these questions, researchers must examine individual wage rates within occupations, within establishments. However, individual wage records are rarely available to researchers, particularly for cross-industry, national studies.

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1 For a summary of these factors, see Richard I. Henderson, Compensation Management in a Knowledge-Based World, 7th ed. (Upper Saddle River, NJ, Prentice Hall, 1997), pp. 28-35.

2 National Compensation Survey: Occupational Wages in the United States, July 2004, Supplementary Tables (Bureau of Labor Statistics, August 2005), p. 3; on the Internet at www.bls.gov/ncs/ocs/sp/ncbl0728.pdf (visited Sept. 26, 2006). For a review of pay diversity among occupations, see John E. Buckley, "Rankings of Full-Time Occupations, by Annual Earnings, July 2004," Compensation and Working Conditions Online (Bureau of Labor Statistics, Nov. 30, 2005), on the Internet at www.bls.gov/opub/cwc/cm20051121ar01p1.htm (visited Oct. 5, 2006).

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Establishment wage differentials.Apr. 2007.
White-collar pay determination under range-of-rate systems.Dec. 1984.
Measuring wage dispersion: pay ranges reflect industry traits (PDF).—Apr. 1981.

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