Product Markets and Paychecks: Deregulation's Effect on the Compensation Structure in Banking

52 Pages Posted: 7 Feb 2006

See all articles by Abigail Wozniak

Abigail Wozniak

Federal Reserve Banks - Federal Reserve Bank of Minneapolis; IZA Institute of Labor Economics

Date Written: January 2006

Abstract

This paper asks how deregulation intended to promote competition in the commercial banking industry affected the compensation structure for banking employees. Using establishment-based data from the Employment Cost Index Survey of the U.S. Bureau of Labor Statistics, I obtain measures of the level and distribution of wage and benefits compensation within industries. I then compare changes in compensation in the banking industry to changes in unaffected industries across states and over time to identify the effects of deregulation. Banking deregulation had no effect on compensation levels or inequality in the industry as a whole, but this masks conflicting changes within the compensation structure. Manager wages fell while non-manager wages held steady, leading to a large decline in between-occupation compensation inequality. In contrast, between-establishment inequality increased dramatically. Deregulation also led to increases in inequality among managers despite their falling wages and to significant shifts in the types of non-wage benefits banking employees received.

Keywords: total compensation, compensation inequality, product market competition

JEL Classification: J31, L11

Suggested Citation

Wozniak, Abigail, Product Markets and Paychecks: Deregulation's Effect on the Compensation Structure in Banking (January 2006). IZA Discussion Paper No. 1957, Available at SSRN: https://ssrn.com/abstract=881565 or http://dx.doi.org/10.2139/ssrn.881565

Abigail Wozniak (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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