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Compensation: Theory, Evidence, and Strategic Implications provides a comprehensive, research-based review of both the determinants and effects of compensation. Combining theory and research from a variety of disciplines, authors Barry Gerhart and Sara L. Rynes examine the three major compensation decisions–pay level, pay structure, and pay delivery systems. provides a comprehensive, research-based review of both the determinants and effects of compensation. Combining theory and research from a variety of disciplines, authors Barry Gerhart and Sara L. Rynes examine the three major compensation decisions–pay level, pay structure, and pay delivery systems.Primarily intended for graduate students in human resource management, psychology, and organizational behavior courses, this book is also an invaluable reference for compensation management consultants and organizational development specialists.

Differences in Pay Level: Why Do Some Companies Pay More than Others?
Differences in pay level: Why do some companies pay more than others?

Every employer constrained by market forces must consider market values in setting his labor costs…. Employers are, to that extent, “pricetakers.” They deal with the market as a given, and do not meaningfully have a “policy” about it.

—Spaulding v. University of Washington (1984)

It is naïve to talk of the “competitive wage,” the “equilibrium wage,” or the “wage that clears the market.”

—Lester (1952)
A Tale of Two Markets

As the above quotations indicate, there are rather substantial differences of opinion about the extent to which employers have discretion in setting pay levels. Those who draw on neoclassical economic theory are inclined to start from the ...

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