Using Econometric Models for Intrafirm Equity Salary Adjustments

This paper addresses the question of how econometric models can provide guidance on the means by which intrafirm discriminatory gender salary differences may be eliminated and how much each injured party should receive. Equity pay adjustment algorithms are developed that incorporate constraints dictated by practical considerations and the legal environment. Bounding salary adjustments from below, while holding constant the aggregate estimated equity salary adjustment, can redistribute compensatory adjustments away from the most underpaid to the most overpaid members of the injured class. Empirical examples are provided for a sample of faculty at a Research I university and a sample of employees of a state-wide supermarket chain.