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Human Resource Management Practices and Wage Dispersion in U.S. Establishments

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  • Stephanie Lluis

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Abstract

This paper explores the relationship between the presence of employee involvement workplace practices and wage dispersion within firms. Using the representative sample of U.S. establishments from the National Employer Survey conducted in 1994 and 1997, the paper explores the links between employee involvement workplace practices adoption and intensity of use (measured by the percentage of a firm's workers who operate under a given practice) and wage inequality within companies using OLS as well as quantile regressions. The results suggest that adoption of employee involvement workplace practices is associated with greater wage dispersion. Compared to establishments not using any of the involvement practices, firms that adopt a partial system or full system of practices, including regular problem-solving meetings and/or self-managed team and/or job rotation, have significantly greater wage dispersion. On the other hand, firms that complement the practices with training for production workers (on teamwork or other problem-solving meetings) have lower dispersion than those who do not complement with training. The results based on employee involvement intensity of use show evidence of compression effects associated with self-managed teamwork in the manufacturing sector at the 25th percentile or for low wage dispersion firms. There is also evidence of wage compression effects associated with problem-solving meetings in the non-manufacturing sector for high wage dispersion firms.

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Paper provided by Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) in its series Working Papers with number 0603.

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Handle: RePEc:hrr:papers:0603

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  1. Helper, Susan & Levine, David I. & Bendoly, Elliott, 2000. "Employee Involvement and Pay at U.S. and Canadian Auto Suppliers," Institute for Research on Labor and Employment, Working Paper Series qt8t51741b, Institute of Industrial Relations, UC Berkeley.
  2. Sandra E. Black & Lisa Lynch & Anya Krivelyova, 2003. "How Workers Fare When Employers Innovate," NBER Working Papers 9569, National Bureau of Economic Research, Inc.
  3. Sandra E Black & Lisa M Lynch, 2002. "What's Driving the New Economy? The Benefits of Workplace Innovation," Working Papers 02-03, Center for Economic Studies, U.S. Census Bureau.
  4. Peter Cappelli & David Neumark, 2001. "Do "high-performance" work practices improve establishment-level outcomes?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 737-775, July.
  5. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  6. Levine, David I., 1991. "Cohesiveness, productivity, and wage dispersion," Journal of Economic Behavior & Organization, Elsevier, vol. 15(2), pages 237-255, March.
  7. Kochan, Thomas A., 1996. "What works at work : overview and assessment," Working papers 3886-96., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Peter Cappelli & William H. Carter, 2000. "Computers, Work Organization, and Wage Outcomes," NBER Working Papers 7987, National Bureau of Economic Research, Inc.
  9. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
  10. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
  11. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  12. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
  13. Jeffrey B. Arthur, 1992. "The link between business strategy and industrial relations systems in American steel minimills," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(3), pages 488-506, April.
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