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308683
Wage Dispersion and Hospital Financial Performance
Tuesday, November 18, 2014
Does wage dispersion provide incentives for competition or perceptions of unfairness among workers? We study the correlations between wage dispersion, staff size, skill level and firm performance. We collected the employee wage dispersion data and hospital financial statements for non-profit hospitals in Maryland. We found a positive effect of wage dispersion among low-skill workers on firm financial outcomes and a negative effect of wage dispersion among high-skill workers on outcomes. More interestingly, there is an offsetting effect from the staff size of each skill type that mitigates the associations between pay distribution and firm performance: The positive effect of wage dispersion among low-skill workers on firm outcomes is reduced when the number of low-skill workers increases. Similarly, the negative effect of wage dispersion among high-skill workers on outcomes is reduced when the number of high-skill worker increases. Despite a large body of theoretical and empirical papers on how wage dispersion and pay fairness might be part of organizational strategies to incentivize or discourage employees to maximize their efforts, prior literature of examining the relation between wage dispersions at different skill levels and firm financial outcomes is scarce, and little research has been done into the area of non-profit healthcare service providers and their workforces. It has been argued that non-profit organizations rely more on intrinsically motivated employees because they can not afford paying higher salary than their for-profit counterparts. If this is indeed the case, these nonprofit firms will be more likely to exhibit wage dispersion as part of their organizational strategies. In this paper we provide new evidence on quantitatively understanding how different aspects of pay dispersions, worker skills, and staff sizes influence firm performance. The findings suggest that pay distribution polices are preferred to policies that only concern about tournament incentive or pay fairness on a universal basis.
Learning Areas:
Administration, management, leadership
Learning Objectives:
Analyze the effects of worker wage dispersion on hospital financial performance. This study suggests that pay distribution polices, such as high dispersion for a small group of low-skill workers and low dispersion for a large group of high-skill workers, should be preferred to policies that only concern about tournament incentive or pay fairness on a universal basis.
Keyword(s): Hospitals
Presenting author's disclosure statement:Qualified on the content I am responsible for because: I am an assistant professor of health policy and management at Columbia University, with Ph.D. in Management/Finance from Rutgers University and other graduate degrees from Columbia University from Indiana University. My research is focuses on healthcare finance and corporate finance and have published research paper on refereed journals like Journal of Corporate Finance and Journal of Empirical Finance.
Any relevant financial relationships? No
I agree to comply with the American Public Health Association Conflict of Interest and Commercial Support Guidelines,
and to disclose to the participants any off-label or experimental uses of a commercial product or service discussed
in my presentation.
