Evolutionary perspectives on salary dispersion within firms

In contrast with neoclassical economic models that assume that individuals hold preferences independently of others, there exist growing bodies of research demonstrating that preferences are often interdependent and based upon relative comparisons. This paper reviews research concerning salary dispersion within firms through the framework of four hypotheses that are generated by evolutionary perspectives. Contrary to some characterizations of evolutionary social science, this review presumes that there exist multiple evolutionary perspectives that have applicability to matters of practical importance. Basic findings include recognition of a strong evolutionarily-sensible preference for relatively high salary standings that is independent of absolute salary amounts. Synthetic findings include identification of research problems that future, directed studies can profitably address. For practical application, my review finds that evolved preferences appear more aligned with salary structures that are dispersed relatively evenly among co-workers when compared with tournament-style compensation patterns.