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Within-Firm Pay Inequality and Productivity

Melanie Wallskog et al.

The Economic Journal2026https://doi.org/10.1093/ej/ueag020article
AJG 4ABDC A*
Weight
0.37

Abstract

Using confidential Census data, we find that aggressive performance pay practices and productivity growth have combined to increase U.S. inequality. Employees at more productive firms earn higher pay at all earnings levels; similarly, when a firm becomes more productive, pay increases across its workforce. Importantly, however, these pay-productivity relationships strengthen with seniority: within a firm, the pay-productivity elasticity more than doubles from the median-paid worker (0.04) to the top-paid worker (0.10). Moreover, this pay-performance relationship is particularly steep when there is more scope for performance-based pay, suggesting that the use of incentives can spur the growth of inequality following productivity growth.

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https://doi.org/https://doi.org/10.1093/ej/ueag020

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@article{melanie2026,
  title        = {{Within-Firm Pay Inequality and Productivity}},
  author       = {Melanie Wallskog et al.},
  journal      = {The Economic Journal},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1093/ej/ueag020},
}

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Within-Firm Pay Inequality and Productivity

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.