From the Job’s Worth to the Person’s Price: Pay Equity Law and the Rise of Market-Based Pay Practices

The last fifty years have seen a widespread embrace of market-based practices by organizations in the U.S. Research shows how competition, the preferences of people power, and the rise of free-market ideology have driven this transformation. Less discussed is the influence of the law on the expansion of market orientations. This article explores how a turn to the market in organizational pay practices was motivated by problems that arose outside the market, in debates over legal liability for pay discrimination. Data including 1,380 archival documents, 98 interviews with compensation practitioners, and 593 newly digitized survey questionnaires from 1985 show how organizations replaced a historically dominant, bureaucratic pay-setting practice—job evaluation—with a market-based approach in response to legal decisions on pay equity cases. When a movement for pay equity known as comparable worth brought pay discrimination cases against employers in the 1980s, judges rejected their claims. These judicial opinions identified an opportunity for employers to reduce liability for discrimination by basing pay on external, market data and human resources professionals embraced the idea. The analysis identifies the role of the law as a motivation for marketization and illustrates the specific capacity of market-based practices to reduce organizations’ responsibility for contested outcomes. These conclusions illustrate how the comparable worth movement backfired by instigating a change in organizational practices that entrenched inequalities.