Abstract
An intriguing new book on employee compensation was published in September of 2012 that merits our attention. The title of the book is Pay: Why People Earn What They Earn and What You Can Do Now to Make More. Its author is Kevin Hallock, a labor economist at Cornell University. The objective of the book is to explain to a general audience how their pay is determined, based primarily on lessons from labor economics and human resources management.
I do not know of another book that attempts to do this with such brevity and focus—226 pages. Textbooks on employee compensation achieve the same goal, but they are considerably longer and cover more topics. For example, one popular text, Compensation by George Milkovich, Jerry Newman and Barry Gerhart, is 690 pages in length. Because of the length of textbooks and their focus on educating professionals, the average person may not develop a clear idea of how their pay is determined even if they have the will and patience to read a textbook.
Hallock has two things going for him to increase his chances of success: He writes clearly, concisely, in plain English and with enthusiasm. He also has a solid background in employee compensation. He teaches compensation management courses, consults in the field and holds several positions at Cornell University involving at least two disciplines. He is Professor, Departments of Economics and HR Studies; Chair, Department of Economics and Director, Institute for Compensation Studies, which features a multidisciplinary approach to the study of compensation.
The book covers the subject comprehensively and includes chapters on the country’s wage distribution patterns, wage earner characteristics, wage inequality, total compensation costs, compensation strategy, job analysis, stock options and executive compensation. Several are highlighted below to give readers a flavor of the book.
The chapters on wage distribution, wage inequality and wage differences by occupation and geographical region are particularly well explained and informative. Researchers will benefit from the identification of obscure sources of information from governmental agencies. The author has demonstrated a powerful tool for finding detailed wage data by occupation for specific cities and identified a table of relative wage–level factors by occupation for major metropolitan areas, to facilitate cost of labor comparisons.
Although it is reasonable to expect the Department of Labor to have such information, finding it is often another matter, as government websites are not known for their user-friendliness. Hallock has done the heavy lifting for us in this regard.
Coverage of executive compensation and stock options is also noteworthy, as the pertinent chapters can serve as quick summaries to refresh the minds of experienced compensation professionals on the key points on these recurring topics. Hallock explains both the practical aspects and recent controversies, such as the selection of objective executive compensation consultants to advise board of director compensation committees. His explanation of stock option award practices, valuation and accounting is clear and concise and should demystify what can be a challenging subject for the uninitiated.
Arguably, his most difficult challenge is to explain to the average person how jobs are evaluated, using a point factor system, and are eventually assigned a salary using a market pay line. He succeeds at both and provides experienced compensation professionals with a template for explaining these practices to executives and potential business clients who have limited compensation knowledge. However, I am unsure of the reception the explanations will receive from the general public, as the treatment is unavoidably technical and may push the average person’s limits of interest in organizational compensation practices.
This brings up the big unknown about the book: Are people really interested in how their pay is determined? You would think that they would have a natural interest in the subject because of pay’s instrumental importance in meeting their financial needs, as well as being a symbol of personal achievement for some people. And interest may be greater now than in the past due to the negative effects of the recession on employee pay and media accounts of excessive CEO compensation packages. But surveys that show whether employees have a desire for more information on pay could not be located, so the reception of the book outside of the HR profession is an open question.
The author has gone to great lengths to make his book interesting and easy to read, in addition to being informative, so his handling of the subject will be a good test of their interest level. As reflected in its title, a small portion of the book (nine pages) covers how people can increase their pay, but there is not enough available information on the subject to satisfy most readers and to sell the book based on this feature.
Although inexperienced HR and compensation professionals will get the most out of the book, there is still much of value for experienced professionals who wish to refresh their minds on important topics and learn about new sources of information and findings from recent research studies. Those that teach introductory HR and compensation management courses will want to consider using the book as a companion to a basic textbook because of its singular focus and clear presentation of arguably the most important HR topic. College placement offices will also find the book of value to counselors and students, as it explains how pay is determined and directs them to reliable sources of compensation information.
Pay is a book that compensation professionals should add to their library because of its success in tackling a subject that few have tried to explain with such brevity and style.