Wage-rate compression commonly occurs when organizations grant pay adjustments to lower-rated jobs but do not extend the adjustments up the hierarchy.

Question

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Wage-rate compression occurs when there is a lack of differentiation in pay between employees in different job levels, especially when pay adjustments are given only to lower-level jobs and not extended to higher-level jobs. This can result in lower morale and motivation among higher-paid employees and lead to retention issues.

Wage-Rate Compression Commonly Occurs When Organizations Grant Pay Adjustments to Lower-Rated