Equal Pay for Equal Work for Equal Pay

Abstract

When is a firm’s wage schedule "fair" to its workers? In contrast to the academic literature that has largely focused on identifying group-level averages in pay while controlling for output, equal pay laws restrict firms to satisfy popular individual-level notions of fairness. Theoretically, we fully characterize the set of wage schedules that satisfy these notions of fairness: wages must be monotonic in output. Empirically, we study whether the pay of researchers at top public universities, where salaries and output are largely observable, are monotonic. Given that output is multidimensional (eg. a publication in one journal may not be as impressive as a publication in another) we investigate whether there is a weighting of output that rationalizes the wages within a firm a monotonic. We show that the answer is no in nearly half of all cases, and that inter-university moves by researchers contributes to violations of monotonicity.