THIS IS ONLY AN INTERPRETATION, FIVE SENTENCES AND A QUESTION IS ALL I NEED. TELL ME YOUR THOUGHTS, HAVE REFERENCES! ASK PROBING QUESTIONS AND MAKE STATEMENTS BASED OFF WHAT THEY WROTE
equity is the perceived idea that employees have that equal pay is
provided based on equal input and output. External equity is a
comparison of one employer’s wages to that of others within that
market. Governments compare their rates of pay to governments of
similar size with similar services and population numbers to determine a
competitive rate of pay. Internal equity dictates for organizations to
set rates of pay based on the value of the job being performed. This
is done through job evaluations. There are four primary methods.
Ranking which looks are the value of the job to an organization. Job
classification which classifies jobs into grades based on value to the
organization. Factor comparison which looks at judging jobs based on
certain compensable factors. Lastly, there is point method which rating
jobs and adding a score based on compensable factors.
compression is the idea that salaries filled from outside of the
organization are equal to or greater than the salaries of the more
experienced existing employees. Wages tend to be equal across the board
regardless of experience. This is a result of changes in market wages
and increased levels of organization. Organizations often see an
increase in training cost in an effort to decrease the gaps in education
and experience. Wage compression can also affect productivity.
Depending on the organization and product being produced organizations
can see a decrease in productivity if employees perceive employees who
do the same or less work than they do are paid higher wages than they
are. In some organizations employees become more productive in to gain
recognition which they expect to result in increased wages.
Gross, T., Guo, C.,
& Charness, G. (2015, September ). Merit Pay and Wage Compression
with Productivity Differences and Uncertainty. Journal of Economic Behavior & Organization, 117,
233-247. Retrieved January 21, 2017, from
Pynes, J. E. (2013). Human Resources Management for Public and NonProfit Organizations. San Francisco: Jossey-Bass.
Santos-Pinto, L. (2012, October). Labor Market Signaling and Self-Confidence: Wage Compression and the Gender Pay Gap. Journal of Labor Economics, 30(4),
873-913. Retrieved January 21, 2018, from