Pay Equity Empirical Inquiries (1989) / Chapter Skim
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1. Salaries, Salary Growth, and Promotions of Men and Women in a Large, Private Firm
1. Salaries, Salary Growth, and Promotions of Men and Women in a Large, Private Firm
Pages 23-48
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From page 23... ...
In practice, these studies have examined differences in pay between men and women controlling for (1) supply-side factors, such as investment in human capital (e.g., general and firmspecific work experience, education)
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PAY EQUITY: EMPIRICAL INQUIRIES influenced by human capital characteristics only insofar as the latter are useful in performing the particular job in question. In other words, firm-level productivity measures potentially carry information on the quality of the match between the worker's abilities and what the job requires.
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Do men and women receive equal salary increases for a given level of performance? Do men and women receive equal salary returns from promotions within the firm?
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Higher ratings and less penetration into the salary range at a particular level were associated with both larger and more frequent salary increases.4 Promotions are based on performance as well, and acIditional consideration is given to years of experience with the firm. A salary increase goes with promotions.
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Squarect terms for job tenure, firm tenure, and potential experience are also includecI. In the cross-sectional analyses, the most recent performance rating prior to the most recent salary change is used.
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By averaging performance ratings and counting promotions over time, the reliability problem is reduced. PAY EQUlf Y: EMPIRICAL INQUIRIES gender.
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Again, the decreasing salary differentials are consistent with the greater salary growth of women observed at each 1980 job level. A cursory examination of the 1980 job levels having sufficient numbers of both men an(l women (1 through 3)
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Finally, the inclusion of job level and number of promotions raises this figure to 72 to 74 percent. Within specific job levels, there is a good clear of variance in the extent to which human capital, average performance rating, an(l promotions can explain the salary growth advantage of women.
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15 Women received larger percentage salary increase returns to job tenure. Recall that the firm's salary increase guicle recommends smaller percentage increases as employees progress within the salary range at a given level.
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As in the case of salary increases, women had a (listinct promotion advantage. Of further interest, this advantage, like the women's salary growth advantage, does not decline at higher job levels.
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C: an Cal o o Cat Cat V)
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Specifically, an increase of 1 point in average performance rating is associated with an additional .45 promotions for men and .33 promotions for women. Effect of Percentage Female In addition to characteristics of employees, characteristics of jobs, such as percentage of female incumbents, may contribute to pay en cl promotion differences.
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that included job level and performance rating. More detailed analyses at specific job levels resulted in still less of the salary (lifferential being explained, although adjusted salary ratios were similar.
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36 o 3 Cal a; so ._ o ._ o to o g ._ ._ V: o o Cal Go lo AS a; o o~ o ~ 3 sin ~ ~ to ~ o C)
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Human capital variables were better able to account for differences in salary growth (40 to 49 percent) an(1 promotions (51 to 62 percent)
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Thus, the common thread is that inclusion of performance rating does not help explain the raw salary advantage of men, but it does explain some of the raw advantage of women with respect to salary growth and promotions. Although women had an overall advantage in the salary increase and promotion process, they receive(1 a smaller payoff for their performance ratings.
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From page 39... ...
Of course, as this equalization process works to its conclusion, women continue to receive lower salaries. In addition to our focus on human capital, job level, and performance ratings, we also examined the possibility that percentage female in a job group was a structural factor contributing to attainment differences.
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PAY EQUITY: EMPIRICAL INQUIRIES Conference Board 1984 Pay and performance: The interaction of compensation and performance appraisal. Research Bulletin, no.
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E 1979 Organizational career mobility: Promotion chances in a corporation during periods of growth and contraction.
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Put in other words, women received, on average, nearly 40 percent more promotions than men. Gerhart an(l Milkovich also carry out breakdowns by job level.
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For example, in 1980, they estimate that for a man, a change from a completely male to a completely female job would be associatecI with an 8 percent lower salary. It seems to me that one of the advantages of studying a single firm is that it provides the opportunity to think in detail about what kinds of processes affect salaries, raises, and promotions.
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From page 46... ...
It is the history of one's performance that is probably most important. The inclusion of average performance rating in predicting raises and promotions over the 6-year period strikes me as a misspecification of the model.
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From page 47... ...
There are also stories based on nonTinearities due either to risk aversion or nonlinearities in the production process. If there is more ex ante unobserved variability for women than for men in their productivity, firms, if they are risk averse, will initially pay women less than men until those productivity differences are revealed.
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From page 48... ...
1986 Job mobility, search, and earnings growth: A reinterpretation of human capital earnings functions.
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