A. What is wage compression?
B. Wage or salary compression is a compensation problem that occurs when "salary structures are not proportional to professional maturity."(1) By professional maturity, I mean, rank and time in rank. In other words, the increase in starting salaries is creating a smaller gap between new employees and more senior employees. Wage compression can occur in tight labour markets, where demand exceeds supply or in companies where senior employees experience a lack of mobility.
A. How can companies deal with this concern?
B. Higher learning educational institutions like, UBC have created a compression fund to supplement their faculties’ salary based on specific qualifying guidelines. Another option is to implement progressive employee benefits such as sabbatical leave, professional development, or special privileges.
References
1. Snyder, J.K., G.W. McLauglin, and J.R. Montgomery. "Diagnosing and Dealing with Salary Compression." Research in Higher Education, vol. 33, (February, 1992), pp. 113-24.
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