“We certainly are seeing that salary compression at entry levels…where the difference between the starting salary and that third or fourth level up used to be $5, and now it’s only $3,” says Jan Koors, senior managing director at the executive compensation advisory firm Pearl Meyer. That can lead to wage compression: when the salaries of less experienced workers become closer to those of more tenured colleagues. But what tends to happen is that companies raise senior employees’ wages by a smaller margin, if at all. When employers raise the base pay for entry-level workers, one would assume senior employees’ wages would also increase. And companies that fail to properly accommodate minimum wage hikes in their salary planning could hurt employee morale and performance and indirectly lower executive pay. Wage increases are known to create a complex ripple effect in the workplace, particularly for employees in the immediate pay levels above entry-level workers.
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