Category Archives: Compensation

Economic Mobility: Is the American Dream Alive and Well?

Source: Isabel Sawhill of The Brookings Institution and John E. Morton of The Pew Charitable Trusts, Economic Mobility Project (Pew Charitable Trusts), 2007

From press release:
American men have less income than their fathers’ generation did at the same age, according to a new analysis released today by the Economic Mobility Project, an initiative of The Pew Charitable Trusts. Comprised of a Principals’ Group of experts from The American Enterprise Institute, The Brookings Institution, The Heritage Foundation, and The Urban Institute, the project seeks to investigate the health and status of economic mobility in America.

According to the report, men who were in their thirties in 1974 had median incomes of about $40,000, while men of the same age in 2004 had median incomes of about $35,000 (adjusted for inflation). Thus, as a group, income for this generation of men is, on average, 12 percent lower than those of their fathers’ generation. While factors other than cash income also contribute to economic mobility, these data challenge the two-century-old presumption that each successive generation will be better off than the one that came before. The findings rely on new analysis of U.S. Census Bureau data.

Wages and the Social Contract – Needed: More Worker Bargaining Power

Source: Thomas A. Kochan, American Prospect, Vol. 18 no. 5, May 2007

From the end of World War II through the mid 1970s, the real wages of American workers nearly doubled, moving up in tandem with the growth in productivity. The United States benefited from an implicit social contract: By working hard and contributing to productivity, profits, and economic growth, workers and their families could expect improved living standards, greater job security, and a secure and dignified retirement. This social contract broke down after 1980, as employees lost their bargaining power. Since then, productivity has grown more than 70 percent while real compensation of nonmanagerial workers has remained flat.

Wages for the lowest-paid workers have collapsed even more than for average workers. While conventional explanations for stagnant wages and increased inequality— such as those that emphasize technological changes and increased premium for skills—may be part of the story, they fail to take into account the historical policy and institutional forces that created and sustained the postwar social contract, or to understand what needs to be done to restore it in a way consistent with the needs of today’s workforce and economy.

Pay for Performance: A Public Sector Puzzle

Source: Dick Grote, IPMA_HR News, March 2007
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True or false: Good workers should get paid better than bad workers. Sounds simple, doesn’t it? But the apparently obvious concept that those who do better work should receive better pay underlies one of the most puzzling public sector performance management issues: the notion of pay for performance. Before a pay for performance system can work, the tool to measure performance must be solidly in place. That’s why it’s a good idea to develop a good performance appraisal system before you tinker with the compensation system. But the conventional appraisal system used in most cities and state agencies doesn’t have the horse power to drive an effective pay for performance effort. The system has to be scrapped and recreated so that the city’s mission statement and vision and values are clearly linked to individual performance.

Skill-Based Pay—Issues for Consideration

Source: Frank Giancola, Benefits & Compensation Digest, May 2007
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Compensation experts agree that skill-based pay is the wave of the future for compensating employees. In this approach, the skills of employees, instead of their jobs, are used to determine base pay. What compensation professionals may not realize is that this is much more than a new way to deliver pay. Adoption usually requires major changes in training and employee development programs, as well as the methods used to select and evaluate employees. Employers considering this method of pay should take into account a number of factors.

Public Sector Compensation in Local Governments: An Analysis

Source: Thom Reilly, Shaun Schoener, and Alice Bolin, Review of Public Personnel Administration, Vol. 27 no. 1, March 2007
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The purpose of this study was to examine local government compensation practices across the United States and to explore possible correlations of these practices to service delivery. One hundred twenty of the largest cities and counties responded to a mail survey, for a response rate of 40%. The data suggest a large percentage (86%) of local governments faced financial difficulties in the form of a budget shortfall since 2000. In response to these shortfalls, local governments were more likely to reduce their workforce, reduce or eliminate services, and/or raise taxes or user fees rather than scale back wages and benefits. Because of this reaction, more than one half of the respondents experienced a decrease in full-time equivalent employment per 1,000 residents. Collective bargaining status, geographical region, and type of government (county or city) were found to be significant factors in determining compensation practices. Implications for practice and policy are advanced.