Category Archives: Compensation

2007 Total Compensation Benchmarking Survey

Source: International Public Management Association for Human Resources, May 2007

The focus of this survey is variable pay—what types of practices are government agencies utilizing to affect their workforces and how effective are these practices? Some highlights from the survey include:

• More than three-quarters of all organizations have a defined pay philosophy
• Most organizations use the traditional grade and step systems although a significant number are using other systems
• Three quarters of respondents offer uniform allowances
• Hiring bonuses are more common at the federal level than at the city or county level
• Less than half of respondents use variable pay
• Of those that do, pay for performance is the most common
• There is a strong correlation between funding levels and the perceived success of the variable pay program
• Fifteen percent of organizations utilize broadbanding
• Thirteen respondents have a gainsharing program in place.
+ Press Release

Low Wages Prevalent in Direct Care and Child Care Workforce

Source: Kristin Smith and Reagan Baughman, Carsey Institute, University of New Hampshire, Policy Brief no. 7, Summer 2007

One in every two direct care workers and one in every three child care workers live in a low-income family (below 200 percent of the poverty line), and many live in poverty. Hourly wages for the caregiving workforce are low and many lack health insurance. Despite work, these families struggle to make ends meet. Our society depends on the care work of many paid professionals-direct care and child care workers-to help meet the daily needs of our children and the elderly. To stem turnover and provide quality services to young children and the elderly, job conditions among the direct care and child care workforce must improve, and increasing wages is a promising place to start.

Performance Pay and Wage Inequality

Source: Thomas Lemieux, W. Bentley MacLeod, Daniel Parent, Institute for the Study of Labor, IZA DP No. 2850, June 2007

We document that an increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using bonuses, commissions, or piece-rates. We find that compensation in performance-pay jobs is more closely tied to both observed (by the econometrician) and unobserved productive characteristics of workers. Moreover, the growing incidence of performance-pay can explain 24 percent of the growth in the variance of male wages between the late 1970s and the early 1990s, and accounts for nearly all of the top-end growth in wage dispersion (above the 80th percentile).

IRS Issues Spring 2007 Statistics of Income Bulletin

Source: Internal Revenue Service, IR-2007-119, June 18, 2007

The Internal Revenue Service today announced the release of the spring 2007 issue of the Statistics of Income Bulletin. Highlights include articles on high-income individual income tax returns, taxpayers reporting noncash contributions, farm proprietorship returns, qualified zone academy bonds, international boycott reports and S corporations.

The article on farm proprietorship returns is the first published by IRS in more than 20 years. In addition, this issue of the Bulletin presents selected tax year 1990-2004 individual income tax return data that have been indexed for inflation and tax year 2005 individual income tax return statistics classified by state and size of adjusted gross income.

For tax year 2004, there were 3,021,435 individual income tax returns filed with adjusted gross income (AGI) of $200,000 or more and 3,067,602 returns with expanded income of $200,000 or more.
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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
(subscription required)

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
(subscription required)

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.