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Has compensation become more flexible?


  • Sandra A. Cannon
  • Bruce C. Fallick
  • Michael Lettau
  • Raven E. Saks


In recent years, numerous observers have argued that global competition, increased reliance on contingent workers, and the breakdown of implicit contracts have made compensation practices in the United States more flexible; in particular, employers have become more concerned with how an employee's pay compares to that in other firms and less concerned with considerations of equity or relative pay within the firm. This paper uses establishment-level data from the Bureau of Labor Statistics' Employment Cost Index program to examine this claim by asking whether the variances of compensation within and between establishments have moved in a more "flexible" direction over the 1980s and 1990s. We find evidence consistent with increased flexibility.

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  • Sandra A. Cannon & Bruce C. Fallick & Michael Lettau & Raven E. Saks, 2000. "Has compensation become more flexible?," Finance and Economics Discussion Series 2000-27, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2000-27

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    References listed on IDEAS

    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    2. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-571, September.
    3. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    4. repec:bin:bpeajo:v:20:y:1989:i:1989-3:p:209-290 is not listed on IDEAS
    5. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 44-49, May.
    6. Carl M. Campbell III & Kunal S. Kamlani, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 759-789.
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    Cited by:

    1. Abigail K. Wozniak, 2007. "Product Markets and Paychecks: Deregulation's Effect on the Compensation Structure in Banking," ILR Review, Cornell University, ILR School, vol. 60(2), pages 246-267, January.
    2. Kandel, Eugene & Pearson, Neil D., 2001. "Flexibility versus Commitment in Personnel Management," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 515-556, December.

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    Wages ; Cafeteria benefit plans;

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