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

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.