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Office of Survey Methods Research
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Published Year: 2012
Survey/Program(s): Compensation and Working Conditions
Catalog: Economic Working Paper
WP Number: WP-453
Publication Status / Disposition: Office of Compensation and Working Conditions (April 2012).
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Inter‐Industry Compensation Differentials
Abstract
A vast literature has sought to assess the magnitude of inter-industry differences in pay and explain why they exist. The measurement of inter-industry pay differentials and the resulting use of this information to assess the empirical relevance of different labor market theories have been hampered, however, by the fact that measures of total compensation -- as opposed to just wages and salaries -- are not available in the datasets traditionally used. To our knowledge, we are the first to use compensation microdata in a study of inter-industry pay differentials. Because nonwage compensation can easily exceed 40 to 50 percent of wages, its inclusion has the potential to alter measured industry pay differences, either diminishing or amplifying them. We find that the inclusion of benefits increases industry dispersion, as measured by the standard deviation of inter-industry differentials, by 16 percent when no controls are included and by an even greater 30 percent when controls are included.