THE WAGE POLICY OF A FIRM

Salary data from a single firm are analyzed in an effort to identify t he firm's wage policy. We find that employees are partly shielded agai nst changes in external market conditions; that wage variation within a job level is large both cross-sectionally and for individuals over t ime, often leading to substantial real wage declines; that wage increa ses are serially correlated even controlling for observable characteri stics; and that promotions and wage growth are strongly related, even though promotion premiums are small relative to the large wage differe nces between job levels. None of the major theories of wage determinat ion can alone explain the evidence.