The Effects of Local Market Conditions on Two Pay Setting Systems in the Federal Sector

Posted: 13 Jan 2000

See all articles by Craig A. Olson

Craig A. Olson

University of Illinois at Urbana-Champaign - School of Labor & Employment Relations

James K. Seward

University of Wisconsin - Madison - Department of Finance, Investment and Banking

Barbara L. Rau

University of Wisconsin - Oshkosh - College of Business

Abstract

The authors examine the sensitivity of wage setting in two federal pay systems--the General Schedule (GS) system, covering white-collar workers, and the Federal Wage System (FWS), covering blue-collar workers--to local wages and cost-of-living. In 1978 and 1980, the years of the data, FWS wages were designed to reflect local labor market wage levels, while GS wages were intended to be responsive to national wage trends, independent of local wage levels. The authors find that FWS wages were closely tied to local external market conditions, as intended. However, GS wages, both for new hires and for longer-tenure employees, were also responsive to those conditions (though less so than FWS wages). To circumvent regulations designed to screen out local labor market effects, GS administrators apparently employed such practices as assigning new employees to higher grade levels than were formally warranted.

JEL Classification: J31, J39

Suggested Citation

Olson, Craig A. and Seward, James K. and Rau, Barbara L., The Effects of Local Market Conditions on Two Pay Setting Systems in the Federal Sector. Available at SSRN: https://ssrn.com/abstract=182315

Craig A. Olson (Contact Author)

University of Illinois at Urbana-Champaign - School of Labor & Employment Relations ( email )

504 East Armory Avenue
Champaign, IL 61820-6297
United States

James K. Seward

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-2738 (Phone)
608-265-4195 (Fax)

Barbara L. Rau

University of Wisconsin - Oshkosh - College of Business ( email )

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