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Do firms manage pay inequality?

Willman, Paul and Pepper, Alexander (2019) Do firms manage pay inequality? Working Paper (31). International Inequalities Institute, London School of Economics and Political Science, London, UK.

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Abstract

We examine the role of the modern firm in generating income inequality. Specifically, we consider the growth in the use of asset-based rewards for senior executives, combined with continued use of salaries and wages for other employees, and the impact this has on measures of inequality within firms. Our paper presents data on intra firm inequality from the UK FTSE 100 for the period 2000-2015. It looks at ratios of CEO to average earnings and attempts to explain both the growth in inequality on this measure and the extent of variance between firms. It distinguishes between a period of “administered inequality” up to the early 1980’s when intra-firm processes defined differential pay and a subsequent one of “outsourced inequality” when capital market measures dominate executive pay. In the latter period, intra firm inequality measures are defined by upward movements in capital market measures and the extent of outsourcing of low paid work.

Item Type: Monograph (Working Paper)
Official URL: http://www.lse.ac.uk/International-Inequalities
Additional Information: © 2019 The Authors
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
M - Business Administration and Business Economics; Marketing; Accounting > M2 - Business Economics > M21 - Business Economics
Date Deposited: 04 Oct 2019 16:06
Last Modified: 25 Jan 2020 00:23
URI: http://eprints.lse.ac.uk/id/eprint/101870

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