Wall Street Journal: Marick Masters on wage inflexibility for union contracts

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Companies across the U.S. economy are raising pay to recruit workers in a tight labor market, increases that are rippling through firms and prompting employers to rethink pay for existing staffers. So-called wage compression—when pay for new hires or entry-level staff approaches what longtime staff or senior colleagues make—poses a financial and management challenge for employers, and has gained new urgency as companies fight to attract and retain employees amid record-high rates of job-quitting. Union contracts can make it tougher for companies to adjust pay to match short-term shocks, said Marick Masters, a management professor at Wayne State University. Contracts typically lock in pay rates and raises for members. “You can’t give huge merit increases, you can’t give lots of promotions,” he said.

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