Corporate Restructuring and Wage Inequality

John C. Dencker
dencker@uiuc.edu
217-333-2383

Chichun Fang
cfang@uiuc.edu
217-265-0953

Institute of Labor and Industrial Relations

University of Illinois at Urbana-Champaign
504 East Armory Avenue
Champaign, IL 61820
ABSTRACT

We argue that corporate restructuring increased wage inequality in recent decades by eroding

organizational and labor market structures in two key ways: through reductions in force—which

increased the degree to which market forces influenced wages—and through the transformation

of payment systems, practices, and policies—which reduced the degree to which pay depended

on seniority. We assess this claim by analyzing twenty-five years of personnel files from a

Fortune 500 energy sector firm that restructured multiple times in the 1980s and 1990s. Our

findings indicate that much of the increase in wage inequality in the firm traced to a large decline

in starting salaries for hourly employees beginning in the 1980s, coupled with an increase in

wages for managers and professionals. Our results also reveal that wage inequality increased as

a result of a decline in returns to job tenure, particularly in years following the change in the

firm’s performance management system. These findings suggest that employee power over wage

setting systems, practices, and policies plays an important role in wage inequality in recent

decades, as do generational factors. Overall, the findings suggest that a critical mechanism

leading to increased wage inequality in recent decades were the decisions by firms, and how they

responded not only to pressures on wages from the external market, but also on pressures from

shareholders to change the way employees were rewarded. We conclude by discussing the

implications of our findings for research on stratification, labor markets, and organizations.

INTRODUCTION

Scholars have bemoaned the lack of sociological research on the well-known but not fully

understood increase in wage inequality in recent decades (cf. Morris and Western 1999; Myles

2003; Nielsen 2007). Given that firms are the main arena for matching wages to employees (cf.

1
Sørensen 1994), and the importance of firms in influencing stratification (cf. Baron 1984), we

might expect the study of firms to play a prominent role in current sociological research on wage

inequality. Yet, despite studies showing that organizations had a non-trivial influence on wage

inequality in recent decades (Batt 2001; Fernandez 2001), there has been little assessment of the

effects of structure and institutions on wages at the firm level, a somewhat surprising outcome

since organizations were transformed substantially by restructuring initiatives from the early

1980s to the present (cf. Cappelli, Bassi, Katz, Knoke, Osterman and Useem 1997)—at the same

time that wage inequality was increasing. In particular, despite important theoretical and

empirical research on effects of restructuring on wage losses among laid off employees (cf.

Baumol, Blinder and Wolff 2003; Farber 2003; McCall 2004; Sørensen 2000), there is little

research on wage inequality among survivors of restructuring, and few studies that assess the

mechanisms by which restructuring might lead to increased wage inequality.

In this article, we argue that corporate restructuring eroded organizational and labor

market structures protecting employees from layoffs, and develop a framework to specify the

ways in which restructuring lead to increases in wage inequality. In particular, we maintain that

two forms of restructuring had a key influence on temporal patterns in employee earnings:

corporate reductions in force (RIF) that involved layoffs of previously protected groups such as

managers in blue chip companies (Cappelli 1992; 2000); and the reorganization of performance

management systems, practices, and policies, wherein institutional rules governing wage

increases such as seniority-based pay increases were replaced with pay-for-performance systems

(Cappelli et al. 1997). We analyze our claims using data from longitudinal personnel files of

employees in a Fortune 500 manufacturing firm for the period 1969 to 1993.

2
ORGANIZATIONAL DETERMINANTS OF WAGE INEQUALITY

Prior to the onset of corporate restructuring in the early 1980s, careers were influenced strongly

by internal labor markets (ILMs)—sets of rules and processes whereby employment and wage

decisions were made within firms rather than through a reliance on the external market

(Doeringer and Piore, 1971). In ILMs, employees were buffered from market competition with

employment separation decisions the right of the employee rather than a firm (Sørensen and

Kalleberg, 1981). In ILMs, jobs existed independently of the persons that occupied them (White

1970), and were linked hierarchically, with employees typically beginning their careers at entry

level portals, and progressing upwards through promotions over time (cf. Rosenfeld 1992).

Wage growth in organizations prior to restructuring was dependent on an employee’s

upward mobility rates, as well as on salary increases within jobs. In particular, human resource

managers assessed jobs according to their worth and placed jobs of equal value into hierarchical

grade levels, with each level having a salary range attached to it (cf. Gerhart and Rynes 2003).

Pay decisions were structured as well, with pay increases dependent on seniority in a job. As a

result, pay rose more rapidly with time in a grade level than performance did (cf. Medoff and

Abraham 1980, 1981), perhaps as a result of disincentives to employees who were passed over

for promotion multiple times (Gibbs 1995). In short, in ILMs, an employee’s wages were a

function not only of his or her ability to move up the organizational job ladder, but also to earn

salary increases within a given job.

Corporate Restructuring and Wage Inequality. The widespread and ongoing

corporate restructuring process began in the U.S. in the early 1980s, and has continued to the

present. During this period, most firms engaged in some form of organizational change, with

many doing so multiple times (Cascio, Morris, and Young 1997). Corporate restructuring

3
represented a significant change to the nature of ILMs, although many structural features of these

systems remained in large firms following restructuring. In particular, restructuring eroded key

structural features of organizations in two main related ways: through corporate RIF, and through

the transformation of performance and reward systems, practices, and policies.

Firms engaging in RIF eliminated guarantees of protection against layoff, making

continued employment a function of market rather than non-market factors (cf. Cappelli, 1992).

Due to RIF, labor market competition was brought to bear on the employment relationship, as

firms had greater flexibility in replacing a manager if they could find a more productive one at a

given wage rate in the external market. By the same token, some surviving employees likely

benefited from the increased incidence of market forces on wages. For instance, employees in

high demand in the external market could command higher wages from their employers. In other

words, the increase in market forces would reduce the effect of job structures on wages, and

increase the influence of individual characteristics and demand for certain types of employees on

wage inequality. Firms transforming their reward and appraisal systems also reduced the degree

of structure inherent in ILMs. In particular, changes to reward systems increased the degree to

which pay depended on short-term performance, thereby making pay much more variable than it

was in ILMs (cf. Cappelli et al., 1997). That is, restructuring firms replaced their previous

reliance on seniority in a firm and/or job in wage increase and promotion decisions with

measures of employee performance.

If corporate restructuring increased wage inequality, it should show up in a number of

ways. First, employees whose jobs are less valued on the external market relative to their current

salary should experience a decline in real wage over time, assuming they are not laid off during a

RIF. That is, if similarly productive employees can be found in the external market at a cheaper

4
wage rate, there will be downward pressures brought to bear on wages of these employees.

Second, employees who are in high demand in the external market may find substantial upward

pressures on wages, with this effect magnified by changes in performance evaluation systems, as

firms seek to retain highly demanded and highly productive employees. Third, one might expect

to see a declining effect of starting salary on current salary over time. That is, the staying power

of starting wages on current salary for a given cohort—holding for many years in firms

characterized by ILMs (cf. Baker, Gibbs, and Holmstrom 1994)—likely dissipated as a result of

restructuring. Finally, the effect of restructuring on wage inequality should show up in

increasing wage dispersion within cohort groups, as pressures on wages for employees perceived

to be more productive either in the external market and/or within firms experience significant

wage increases, and as the elimination of seniority based wage increases results in a declining

real wage for the least productive employees.

DATA, MEASURES, AND METHODS

In order to assess whether corporate restructuring increased wage inequality, we analyze

confidential personnel files obtained from a Fortune 500 manufacturing firm for the period 1969-

1993. We also draw on information collected from corporate documents and semi-structured

interviews conducted with several of the firm’s human resource managers at the firm’s main

corporate office. The firm was a large, diversified energy sector firm. Like most other large

firms, its ILM contained a salary grade level (SGL) system that consisted of jobs hierarchically

ranked into grades to which salaries were attached. Non-exempt employees (e.g., secretarial,

support staff) were in SGL 1 to 9. By contrast, exempt employees (e.g., managers and

professionals) were in SGL 7 to 24. The exempt SGL system had common entry ports, with

5
individuals having bachelors’ degrees typically placed into level 7, and individuals with masters’

degrees placed into level 8. In addition, roughly 25 percent of the employees in the firm were

paid on an hourly basis, with roughly one-third of these employees belonging to a union.

Once hired, employees in the SGL system moved from lower to higher graded jobs

through promotions that were based on relative performance, with a move to a job in a higher

SGL representing a promotion, and a move to a job in the same level representing a transfer.

Wages were structured as well, although there was some variation over time in the degree to

which they were recurring. In particular, two years prior to the first RIF, the firm instituted an

incentive pay program that allowed managers to award subordinates with non-recurring bonuses

that depended on performance.

The personnel files cover a long time period to provide a useful test for assessing how a

large firm rewarded its employees in changing economic contexts. For instance, the records

cover the period of the oil shocks in the early 1970s, high levels of employment growth in the

late 1970s, recession in the early 1980s, and the restructuring period from the mid 1980s onward.

During the restructuring period, the firm undertook two RIF. The first RIF occurred in the mid

1980s during a time of hostile takeover activity. The firm was not taken over in this period, nor

was there any indication that it was a takeover target, although a number of the firm’s

competitors were, a common pattern in mature industries (Cappelli et al., 1997: 33). The second

RIF occurred in the early 1990s, subsequent to regulatory changes limiting takeovers, but during

a period when institutional investors sought to exert their increasing power by pressuring firms to

change the way they were managed (cf. Useem, 1996).

In the interim between the two RIF, the firm transformed its performance management

system. It sent senior managers to other firms to study the changes that they made, and hired

6
consultants to help design and implement the new performance management system. The firm

transitioned from a seniority-based system to one in which pay was contingent on a manager’s

performance, a broad action similar to that undertaken by other large firms in the time period. In

doing so, the firm sought to make performance objectives measurable, attainable, and relevant.

As part of the performance management change, performance records were eliminated soon after

pay decisions were made. According to the firm, this decision was enacted in order to minimize

potential bias in future performance rankings, in that prior performance in theory would be less

likely to be taken into account in measuring current performance. For instance, by eliminating

performance records, the firm sought to remove the problems that arise from labeling employees,

which in turn would also ensure that wage increases were ‘re-earned” in each year.

Data Set. The firm provided a 25% random sample of full career records of the firm’s

U.S. employees tracing from 1967.1 For some employees, information on salary was missing in

the earliest years of the sample. Because including these employees in the sample to be analyzed

can lead to a survivorship bias (Petersen, 1995), we follow convention (cf. Petersen and Saporta,

2004) and study wage inequality only for managers whose careers could be traced from their

initial entry in the firm beginning in 1969, resulting in a sample of 20,480 employees.

Dependent Variable. Our dependent variable is the log of an employee’s salary,

measured in 2007 constant dollars, with wage records updated each month based on the

Consumer Price Index (CPI) Deflator.

Independent Variables. In order to capture effects of restructuring on wages and wage

inequality, we use several time varying variables. In particular, we examine wages in five

equally-spaced time frames: 1969-1973, 1974-1978; 1979-1983, 1984-1988, and 1989-1993.

1
The firm also provided a data set containing information for all employees who were in the firm in 1967 or who
entered at some point in time afterwards. However, this data set does not include career information.

7
The 1984-1988 time period contains the first RIF, whereas the 1989-1993 period contains both

the second RIF and the transformation in the firm’s performance management system. We also

provide graphs of real wages for each year from 1969 to 1993.

We assess variation in wages for a number of different independent variables over time.

We assess job type using a categorization of the firm’s SGL system, and with measures for

hourly employees. Due in part to a lack of managers in a number of SGL in a given year, we

grouped SGL that were similar on many dimensions. For exempt employees, we use the

following scheme: levels 7 to 9 (entry managers); levels 10 to 12 (middle managers); levels 13 to

16 (upper middle managers); and levels 17 to 24 (upper level managers). Discussions with

managers and an inspection of the data set helped me to create the salary grade level groupings.

Main results were robust to models that included all salary grade levels. We grouped non-

exempt grade levels as follows: levels 1 to 3 (entry level), levels 4 to 6, and levels 7 to 9.

We also assess wage increasing with increasing time spent in a job level, with this

measure updated monthly. We examine effects of starting salary on current salary with a

measure of the log of real wages at time of hire. Lastly, because rates of departure can have an

influence on wage inequality, we control for employment separation using a dummy measure

capturing whether an employee departed the firm for any reason during a given time frame

(coded one), or instead was censored (coded zero).

Control Variables. We control for demographic, organizational, and human capital

variables common in studies of wage inequality in large firms (cf. Petersen and Saporta, 2004):

time spent in a job level, age, education, occupation, tenure in the firm, salary grade level, race,

and sex. Age, and tenure are time varying and updated in each person-period of the sample.

Education dummies were created to reflect whether or not an employee had a HS or HS

8
equivalency degree, a bachelors’ degree, or a post-graduate degree (e.g., MBA, PhD). Sex

(female) was coded one for female managers and zero for male managers. Race (minority) was

coded one for minority managers, and zero otherwise. We also controlled for union status.

We also consider how a manager’s performance influences his or her chances of

departure. As noted, the firm eliminated all records of these evaluations. We therefore consider

several performance proxies. Following Gibbs (1995), we argue that the lowest performing

manager in a level have the most experience in that level. Since this duration in a grade level

measure does not perfectly reflect performance, we also examine another measure of

performance, namely whether a manager had ever been demoted during his or her career. These

performance proxies are time-varying, and updated in each month.

Methods. For each employee in the firm, we generated a monthly event history file (cf.

Allison 1982). These records were updated for each career change. For instance, if an employee

was promoted, we updated his or her salary grade level change, as well as the associated wage

change. As noted, nominal wages were updated to real wages in each month based on the CPI

deflator. We use OLS regression to measure effects of our independent and control variables on

log salary, and provide robust standard errors, clustered by employee.

RESULTS

Table 1 provides descriptive statistics for employees at initial hire, and highlights a number of

trends in entry-level wages. For non-exempt employees, real wages were generally stagnant or

declining over time. For hourly employees, there was a sharp decline in starting wages

beginning in the early 1980s, with both union and non-union entrants experiencing sharp

reductions in wages throughout the 1980s and 1990s. In particular, real wages for unionized new

9
hires declined by more than $12,000 from 1984-1988 relative to the previous 5 year time frame,

whereas real wages for non-union new hires declined by more than $16,000 in this period.

For exempt entry level employees, starting real wages were roughly constant over time.

However, for the few employees hired into middle management positions, real wages tended to

increase over time. These patterns are shown graphically in Figure 1, which provides the mean

starting salary (in 2007 US$) for hourly, exempt (SGL 7-24), and non-exempt (SGL 1-9) in each

year from 1969 to 1993. In particular, Figure 1 shows that hourly employees starting real

salaries increased slightly from 1969 to 1980, after which time it declined steadily for most of

the 1980s. Non-exempt employees by contrast, experienced a slight increase in starting real

wages over time, whereas exempt employees experienced a slight decrease in starting real wages

throughout the 1970s, followed by an uptick in the early 1980s.

---Insert Table 1 and Figure 1 about here---

Figure 2 provides information on average real wages for employees in different job

groups over time (for new entrants to the firm from 1969 to 1993). Similar to the patterns in

Figure 1, it shows that hourly employees experienced a decline in real wages, with the largest

decrease coming from the early to mid 1980s to 1990. In addition, non-exempt employees

experienced a slight constant increase in real wages over time. By contrast, exempt employees

experienced a large steady increase in real wages from the late 1960s to the mid 1980s, with the

biggest increase occurring following the recession of the early 1980s. In addition, Figure 3

shows that there were substantial differences in real wages of union and non-union hourly

employees from the early 1980s onward, with both experiencing substantial declines, but with

wages of non-union employees dropping at a much faster rate.

---Insert Figures 2 and 3 about here---

10
 Table 2 provides results for regressions predicting the log of real wages for all new

entrants to the firm from 1969-1993. Column 1 includes the controls measures, and shows that,

as expected, wages are generally an increasing function of grade level, albeit with hourly

employees paid at a much higher rate than entry level non-exempt SGL employees. Column 2

adds effects of entry year dummy measures, and shows that real wages upon entry are declining

over time. Unreported supplemental analyses reveal that much of this pattern traces to the

experience of hourly employees.

---Insert Table 2 about here---

Column 3 of Table 2 adds the year dummy measures. It shows that real wages declined

in increasing year, although, like the effect for entry year, much of the decline stemmed from the

experience of hourly employees. Column 4 of Table 2 adds the measure for starting real wage.

It shows that much of the effect of entry year on current wage was a function of the wage at hire,

a pattern holding both for analyses of hourly and exempt/non-exempt sub-samples (results not

reported). Nevertheless, the decline in real wages over time held even with the control for

starting salary, particular among hourly employees.

Column 5 of Table 2 adds the interaction between the departure measure and the year

dummies to the variables in Column 4. Results reveal that the negative effect of departure on the

log of real wages was strongest from the mid 1980s to 1993, during the period of restructuring.

Column 6 of Table 2 adds the interaction between the tenure in job measure and the year

dummies to the variables in Column 4. Findings indicate that there was a strong negative effect

of time in a job on wages from the early 1980s to 1993, with the effect growing more negative

over time. In other words, returns to seniority were declining substantially over time, with the

strongest negative effect occurring during the period of corporate restructuring.

11
 Finally, (unreported) exploratory analyses of measures of wage inequality such as the

variance in log wages (cf. Mouw and Kalleberg 2007), and quantile regression (cf. Morris,

Bernhardt, and Handcock 1994) suggest that restructuring increased within-cohort inequality,

due not only to the reduction in starting salaries for hourly employees, but also to the decline in

effects of seniority in a job on wage growth along with increasing returns for employees who are

promoted at a relatively more rapid rate.

DISCUSSION

In this article, we developed a framework to explain the effects of corporate restructuring on

wage inequality. Our findings indicate that corporate restructuring reduced effects of labor

market structures on wages, such as those related to starting wages of hourly employees. These

patterns help to explain why wage inequality began to increase in the early 1980s. In particular,

our findings show a considerable decline in starting wages of hourly employees throughout the

1980s, a general increase in starting salaries for exempt employees for part of this time frame—

and stagnant wages for non-exempt employees.

Our findings have a number of important implications for research on inequality,

organizations, and labor markets. For instance, they reveal that a non-trivial percentage of the

increase in wage inequality from the 1980s onward was due to the elimination of labor market

structures and institutions, especially those related to the barriers between employees and the

external labor market—that is, an ILM—and transformations in rules governing wage setting. In

other words, absent the erosion of these structures, wage inequality arguably would have been

lower, as might be expected in firms in countries that preserved institutional features of labor

markets, as was the case in Continental Europe (cf. DiPrete 2005).

12
 Our findings also shed light on debates about efficiency wages and inter-industry wage

differentials (cf. Krueger and Summers 1988). That is, the firm we studied reduced starting

wages for hourly employees, while maintaining or increasing starting salaries for SGL

employees. Moreover, results also suggest that the firm did not limit wage inequality within

cohort and employee groups as in the past. Both of these outcomes are consistent with findings

that industries previously characterized by high wages for all employee groups, as was the case

in the industry of the firm we studied, experienced a decline in real wages. Thus, our findings

suggest that notions of equity within organizations have disappeared in recent decades, and raise

important concerns regarding generational and occupational differences in work outcomes.

Our results are consistent with economic accounts such as the recent study by Lemieux,

MacLeod, and Parent (2007) who find that pay-for-performance systems account for roughly

one-fourth of the growth in variance in male wages from the late 1970s to the early 1990s.

However, they counter recent claims of labor economists that cohort effects (i.e., the staying

power of starting salary on current salary over periods of time) trace to task-specific human

capital (Gibbons and Waldman 2006), rather than to institutional effects such as seniority based

payment practices.

Limitations and Directions for Future Research. The findings reported in this article

stem from one large firm, raising questions regarding potential generalizability. Several factors

reduce these concerns. First, results are largely similar to findings from other large firms in the

1970s (cf. Lazear 1992; Petersen and Saporta 2004). Second, like most large firms, the firm we

studied restructured multiple times (cf. Cascio, Young, and Morris 1997), and relied on external

advice from consultants on the design and implementation of restructuring initiatives, as well as

from senior managers sent to other firms to examine best practices for restructuring.

13
 Unfortunately, as noted, we do not have records of employee performance, which would

provide additional insight into the determinants of wage inequality within firms over time. Thus,

for instance, we can not say for certain that effects of performance on earnings would vary across

racial and ethnic groups, as recent research suggests (Castilla, forthcoming), or of whether firms

employing forced performance curves create a disjoint between wages and productivity. In

addition, the lack of performance records somewhat preclude our ability to assess claims that

unobserved ability is a key driver of wage inequality as economic accounts indicate (Juhn,

Murphy and Pierce 1993), although they do lend support to the notion that sociologists must take

such possibilities into account in their explanations for inequality (Nielsen 2007).

DISCUSSION

In this article we responded to calls for a sociological approach to explain the well-known but

little understood increase in wage inequality from the 1980s to present. Our firm-level

framework highlights the importance of corporate restructuring in reducing effects of labor

market structures and institutions on wages, which in turn leads to increased inequality among

employees in restructuring firms. Our findings suggest that the firm we studied increasingly

relied on market forces to govern employment outcomes, albeit with substantially different

effects for different employee groups. Thus, although job and wage structures continue to play a

key role in employee earnings in contemporary firms (cf. Goldthorpe 2000)—as suggested by

differences in wages for union and non-union hourly employees—their ability to limit wage

inequality has been substantially reduced, as perhaps suggested by the experience of firms in

countries that preserved institutional features of labor markets in recent decades.

14
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FIGURE 1

80000
Mean Starting Wage by Year in 2007 Dollars

60000
Real Income

40000

20000

1970 1975 1980 1985 1990 1995

Year

Hourly Non-Exempt
Exempt

FIGURE 2

100000 Mean Real Wage for New Entrants from 1969-

1993
80000

Real Wage
60000

40000

20000

1970 1975 1980 1985 1990 1995

Year

Hourly Non-Exempt
Exempt

17
FIGURE 3

55000
Mean Real Wage for Union and Non Union Members
50000
Real Wage

45000
40000
35000

1970 1975 1980 1985 1990 1995

Year
Union Hourly Non-Union Hourly

18
 TABLE 1.
Characteristics of Employees at Initial Hire in a Large U.S. Manufacturing Firm

Variable 1969-1973 1974-1978 1979-1983 1984-1988 1989-1993 All Years

Total Number of New Hires 3,352 4,242 5,658 3,666 3,562 20,480
% SGL 1-3 Non-Exempt 26.49% 18.69% 16.31% 13.07% 8.87% 16.60%
Average Real Wage ($2007) $26,598 $24,761 $24,731 $23,035 $24,397 $24,956
% SGL 4-6 Non-Exempt 33.05% 21.64% 21.14% 17.27% 16.56% 21.70%
Average Real Wage ($2007) $35,801 $35,557 $33,619 $35,429 $35,698 $35,098
% SGL 7-9 Non-Exempt 0.92% 1.74% 3.98% 3.27% 5.87% 3.22%
Average Real Wage ($2007) $49,074 $52,941 $49,704 $47,925 $43,309 $47,686
% SGL 7-9 Exempt 13.93% 20.89% 27.24% 20.84% 24.65% 22.15%
Average Real Wage ($2007) $59,563 $61,170 $59,108 $58,108 $56,565 $58,897
% SGL 10-12 Exempt 3.85% 5.23% 5.83% 6.93% 5.95% 5.60%
Average Real Wage ($2007) $87,679 $91,877 $93,929 $95,086 $96,494 $93,560
% SGL 13-16 Exempt 0.69% 0.64% 0.51% 0.87% 1.12% 0.74%
Average Real Wage ($2007) $138,746 $133,368 $147,005 $145,343 $154,532 $144,950
% SGL 17-24 Exempt 0.06% 0.05% 0.04% 0.08% 0.14% 0.07%
Average Real Wage ($2007) $278,435 $269,529 $225,840 $263,606 $215,040 $243,830
% Hourly 21.00% 31.12% 24.96% 37.67% 36.83% 29.93%
Average Real Wage All Hourly ($2007) $45,619 $48,480 $44,232 $27,736 $25,353 $37,548
Average Real Wage Union Hourly ($2007) $46,989 $51,401 $49,721 $37,393 $36,708 $46,077
% Main Corporate Office 10.05% 16.50% 15.59% 21.14% 24.20% 17.36%
% Human Resource Function 0.57% 0.64% 0.67% 0.92% 1.54% 0.84%
Age 27.44 27.51 28.30 29.42 28.90 28.30
% with bachelor’s Degree 9.76% 17.47% 24.44% 20.29% 24.99% 19.95%
% with master’s or Ph.D. Degree 4.39% 8.13% 9.12% 7.09% 6.43% 7.31%
% Female 34.13% 32.15% 37.31% 47.71% 49.32% 39.67%
% Minority 22.34% 18.39% 14.92% 17.73% 27.09% 19.47%

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 TABLE 2
OLS Models Predicting Log Real Wages for New Entrants in a Large US Manufacturing Firm, 1969-1993
Variable Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
SGL 1-3 Non-Exempt -.33*** (.00) -.34*** (.00) -.34*** (.00) -.15*** (.00) -.15*** (.00) -.14*** (.00)
SGL 4-6 Non-Exempt -.09*** (.00) -.09*** (.00) -.09*** (.00) -.02*** (.00) -.02*** (.00) -.02*** (.00)
SGL 7-9 Non-Exempt .16*** (.00) .17*** (.00) .17*** (.00) .10*** (.00) .10*** (.00) .10*** (.00)
SGL 7-9 Exempt .34*** (.00) .34*** (.00) .34*** (.00) .19*** (.00) .19*** (.00) .19*** (.00)
SGL 10-12 Exempt .63*** (.00) .63*** (.00) .63*** (.00) .35*** (.00) .35*** (.00) .35*** (.00)
SGL 13-16 Exempt .94*** (.00) .94*** (.00) .94*** (.00) .53*** (.00) .53*** (.00) .54*** (.00)
SGL 17-24 Exempt 1.35*** (.00) 1.36*** (.00) 1.37*** (.00) .79*** (.00) .79*** (.00) .79*** (.00)
Departure -.28*** (.00) -.24*** (.00) -.24*** (.00) -.14*** (.00) -.04*** (.00) -.13*** (.00)
Job Tenure in Months*12 .005*** (.00) .005*** (.00) .005*** (.00) -.014*** (.00) -.014*** (.00) .008*** (.00)
Log Starting Wage .61*** (.00) .62*** (.00) .61*** (.00)
Entry Year 1974-1978 -.004*** (.00) .03*** (.00) .02*** (.00) .02*** (.00) .03*** (.00)
Entry Year 1979-1983 -.046*** (.00) .02*** (.00) .03*** (.00) .03*** (.00) .03*** (.00)
Entry Year 1984-1988 -.135*** (.00) -.04*** (.00) .01*** (.00) .01*** (.00) .00† (.00)
Entry Year 1989-1993 -.175*** (.00) -.05*** (.00) .01*** (.00) .01*** (.00) -.01*** (.00)
Year 1974-1978 -.01*** (.00) .00 (.00) .00 (.00) -.01*** (.00)
Year 1979-1983 -.07*** (.00) -.05*** (.00) -.05*** (.00) -.03*** (.00)
Year 1984-1988 -.09*** (.00) -.06*** (.00) -.06*** (.00) -.03*** (.00)
Year 1989-1993 -.13*** (.00) -.10*** (.00) -.10*** (.00) -.06*** (.00)
Year 1974-1978*Depart -.06*** (.00)
Year 1979-1983*Depart -.07*** (.00)
Year 1984-1988*Depart -.15*** (.00)
Year 1989-1993*Depart -.14*** (.00)
Year 1974-1978*Tenure -.003*** (.00)
Year 1979-1983*Tenure -.019*** (.00)
Year 1984-1988*Tenure -.021*** (.00)
Year 1989-1993*Tenure -.025*** (.00)

Constant 10.48*** (.00) 10.49*** (.00) 10.47*** (.00) 4.06*** (.00) 4.06*** (.00) 4.06*** (.00)
Df 27 31 35 36 40 40
Adj R-squared .78 .79 .79 .90 .90 .90
Note: Hourly employees are the omitted job-type reference group. Controls for age, seniority in firm, education, promotion, demotion, gender, ethnicity,
division, and union status included in all models (results not reported). Sample size in all models is 20,480 employees (1,197,360 employee months). Robust
(Huber/White) standard errors in parentheses. †p<.10; *p<.05; **p<.01; ***p<.001 (two-tailed tests).

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