Why are co-workers in the same job at the same company paid differently? MIT Sloan study finds employees who perform specialized tasks earn 5% more than their colleagues

CAMBRIDGE, Mass., Feb. 25, 2020 /PRNewswire/ -- At a time when wage inequality and workplace fairness dominate the national conversation, a new study by Nathan Wilmers, the Sarofim Family Career Development Professor at the MIT Sloan School of Management, sheds light on the factors that drive pay disparities among workers. The study is published in the latest edition of Administrative Science Quarterly.

"Many people think that pay inequality is driven by the rise of globalization and technological changes—and while those trends have certainly played a big part in widening earnings gaps, there's more to the story," says Prof. Wilmers. "My research, which looks at what's happening inside organizations at a granular level, finds that the ways in which managers allocate tasks to their workers has a significant impact on what people earn. Employees who are assigned unique and distinctive tasks are paid more compared to their co-workers in the same job."

Prof. Wilmers studied 13 years' worth of publicly available, individual-level data for employees of U.S. labor unions. He looked at a range of blue- and white-collar job titles—from accountants, lawyers, and union presidents to administrative assistants, maintenance workers, and janitors. His research considered several key measures: the specific tasks that people performed over the course of their workday, whether employees performed one or multiple types of tasks, whether or not those tasks were distinctive from those of their coworkers, and how much individuals were paid each year. Distinctive tasks are those performed by few employees, such as being the only political operative or the only contract negotiator at a given organization. Prof. Wilmers calls these distinctive tasks "job turf," as employees can monopolize the learning and discretion associated with being the only person in an organization who performs certain activities.

He found that, on average, workers who performed distinctive tasks earned 5% more than colleagues working at the same organization in the same job. This finding held true even when controlling for other variables, such as an employee's length of tenure, past work experiences, level of education, and gender. Prof. Wilmers also found that it was not the complexity of the employee's specialized task that yielded the higher pay premium to distinctiveness; what mattered was how different the task was from the tasks performed by his or her co-workers.

"The more unique the task, the more valuable it is in terms of how much an employee earns," he says. "In other words, an employee's paycheck does not depend only on the scarcity of general skills in the labor market, but rather on scarcity of specific skills within the organization. Employees who do unique tasks have more job turf and therefore tend to command higher pay."

His study shows how organizations unwittingly create pay inequality among workers. Employers could, of course, erode job turf—and the pay premium that comes with it—by assigning tasks more evenly across employees. But, as jobs evolve from requiring a single task to multiple different tasks, their skill requirements expand accordingly. "Instead, organizations often reduce task variety to expose a position to a broader pool of potential job applicants," he explains. "In doing so, some task areas become turf, commanding higher earnings, while other jobs lose task variety and are exposed to increased competition."

His research has implications for both employers and employees. "All else equal, doing tasks distinctive from colleagues makes employees harder to replace. So, one strategy for employees trying to raise their value to their current employer would be to take on unique chores and responsibilities at work," he says.

Meanwhile, employers ought to bear in mind that assigning specialized tasks to some employees may have unintended consequences. "It's a delicate balance," he says. "Managers can't have every employee be a jack-of-all-trades because there are certain distinctive tasks that need to get done and it is costly to fill jobs that require a bunch of different types of skill. However, allocating more specialized tasks to some workers gives them more bargaining power over their pay. For managers concerned about how to ensure relative equality and maintain pay fairness, this is a really important dynamic to watch out for."

About MIT Sloan School of Management 
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SOURCE MIT Sloan School of Management

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