Wage policy patterns at the firm level: An analysis of medium and large Italian firms

Abstract

This article provides an empirical analysis of wage policy at the firm level. Based on cluster analysis applied to a sample of medium and large Italian firms and their employees, this article classifies the wage policy patterns adopted, provides preliminary evidence on the dynamics of wage policy at the firm level and outlines the drivers underpinning the identified patterns. The results of the empirical analyses show that identified wage policy patterns present a mix of hybrid characteristics rather than alignment with the ideal types of the internal and the external labour markets hypothesized in the literature. The wage policy models adopted by sampled firms display significant dynamic patterns between 1989 and 2004: 28.9 per cent of the firms sampled in both years switch to a different wage policy, with an overall increase of firms providing leading pay rates