Managerial Compensation, Unfair Wages and Productivity: J.K. Galbraith Revisited
Interdisciplinary research shows that income comparisons are pervasive at the workplace. I examine the idea that management compensation impacts significantly on work morale and effort. The effect operates by the influence executive pay has on worker perceptions of unfair wages. I utilise Australian Longitudinal data (1994-1998) at the firm level that incorporates information on worker education and skills as well as managerial compensation and other wages. Also, I exploit 'Ilo Laborsta' panel data ( 1985-2004) to consider the hypothesis in the global context. The evidence is consistent with the view that a wage premium exists that depends on changes in the 'unfair wage'. We account for human capital effects and reverse causality.
Keywords: Unfair Wages, Income Distribution, Human Capital, Longitudinal Data, Labour Productivity
Dr George Messinis
Research Fellow, Centre for Strategic Economic Studies, Victoria University