• PRO
  • Events
  • About Blog Popular
  • Login
  • Register
  • PRO
  • Resources
    • Latest updates
    • Q&A
    • In-depth
    • In-house view
    • Practical resources
    • FromCounsel New
    • Commentary
  • Research tools
    • Global research hub
    • Lexy
    • Primary sources
    • Scanner
    • Research reports
  • Resources
  • Research tools
  • Learn
    • All
    • Webinars
    • Videos
  • Learn
  • Experts
    • Find experts
    • Influencers
    • Client Choice New
    • Firms
    • About
    Introducing Instruct Counsel
    The next generation search tool for finding the right lawyer for you.
  • Experts
  • My newsfeed
  • Events
  • About
  • Blog
  • Popular
  • Find experts
  • Influencers
  • Client Choice New
  • Firms
  • About
Introducing Instruct Counsel
The next generation search tool for finding the right lawyer for you.
  • Compare
  • Topics
  • Interviews
  • Guides

Analytics

Review your content's performance and reach.

  • Analytics dashboard
  • Top articles
  • Top authors
  • Who's reading?

Content Development

Become your target audience’s go-to resource for today’s hottest topics.

  • Trending Topics
  • Discover Content
  • Horizons
  • Ideation

Client Intelligence

Understand your clients’ strategies and the most pressing issues they are facing.

  • Track Sectors
  • Track Clients
  • Mandates
  • Discover Companies
  • Reports Centre

Competitor Intelligence

Keep a step ahead of your key competitors and benchmark against them.

  • Benchmarking
  • Competitor Mandates
Home

Back Forward
  • Save & file
  • View original
  • Forward
  • Share
    • Facebook
    • Twitter
    • Linked In
  • Follow
    Please login to follow content.
  • Like
  • Instruct

add to folder:

  • My saved (default)
  • Read later
Folders shared with you

Register now for your free, tailored, daily legal newsfeed service.

Questions? Please contact [email protected]

Register

Primer on Wage Analyses for Antitrust Attorneys: Part II

Edgeworth Economics

To view this article you need a PDF viewer such as Adobe Reader. Download Adobe Acrobat Reader

If you can't read this PDF, you can view its text here. Go back to the PDF .

USA May 25 2018

May 2018

Primer on Wage Analyses for Antitrust Attorneys: Part II

Dr. Stephen G. Bronars

Partner | Washington, DC

[email protected]

+1 202.580.7777

In response to the Department of Justice’s increased focus on no-poaching

agreements, we have compiled a two-part primer on wage analyses for antitrust

attorneys. In part one, we provided a high-level comparison of pricing and wage

models and identified data sources that will be useful in analyzing no-poaching

claims. Here, we discuss common issues to address when modeling wages.

Modeling Wages 

 

Wage determination models have been developed by labor economics experts

for pay discrimination cases. Such wage models include worker and job

characteristics such as prior labor market experience, time at the company

(tenure), time in the job, measures of productivity, job performance evaluations,

department, and job title, among others. Although the specific characteristic

will vary based on company- and data-specific factors, below we discuss four

challenges that often arise in modeling wages and explain how modeling wages

across multiple firms in a no-poaching context further complicates matters.

Dr. Deborah K. Foster

Partner | Washington, DC

[email protected]

+1 202.580.7771

1. Capturing and Measuring All Components of Pay

Measuring total compensation is not as straightforward as it seems. For hourly

employees, shift differentials (additional pay for things like night or weekend

shifts) and other premiums can result in regular rates of pay higher than the

employee’s base hourly rate. Overtime (and in some places, double time) 

Originally published in Law360, May 2018.

www.edgewortheconomics.com

Primer on Wage Analyses for Antitrust Attorneys: Part II

premiums also impact total compensation. One solution is to use W-2 earnings, but for employees who did not work

the full year (either due to hire/termination during the year or leaves of absence) or for those who worked in multiple

positions within the year, that measure can be misleading. 

Other payments, such as bonuses and commissions, are often paid after they are earned. For example, annual

bonuses for performance in the calendar year may not be paid until the following calendar year.

1

 In such cases, W-2

earnings are a mixture of compensation that was earned in both the current and the prior year. Also, if an employee

leaves between the end of the calendar year on which such payments are based and when the payments are

actually made, he or she will often not receive that bonus.

Multi-Firm Complexity: When examining possible wage suppression among multiple firms, nonwage compensation

such as 401K matching contributions, health insurance, commuting benefits, on-site childcare or childcare subsidies,

etc. may also be relevant. To the extent that some firms increase nonwage benefits (presumably at the expense

of wage growth), understanding the cost of changes in nonwage benefits is important to ensure that decreases

in wage growth associated with increases in the cost of nonwage benefits are not erroneously identified as wage

suppression due to no-poaching agreements.

Stock options and other types of ownership-sharing awards present another complication. Even after options

have vested, there is often a period of time over which the employee can decide when to exercise the option,

and the value may change over that period. Even more challenging, when start-ups offer ownership shares to

early employees, it is often with the anticipation that the company will grow and that ownership will become

more valuable over time. For start-ups, there is not even a stock market trading ownership shares, let alone an

option market. It is also likely that not all employees will choose to exercise their options but that does mean that

unexercised options have no value. 

2. Identifying the Factors That Determine Pay 

The factors that determine pay may be different across jobs. For example, entry-level positions may require a college

degree, but whether someone holds a college degree may not be relevant for more experienced employees and

positions. On the other hand, sales revenue is likely an important determinant of pay in sales occupations, but not

relevant for those in support functions. 

Even if the factors impacting pay are the same company-wide, the relative importance of those factors may differ

across groups of employees depending on characteristics such as job level, division, and/or location. For example,

individual compensation is likely to be more closely related to overall firm performance for high-level executives than

for employees in entry-level positions. Employees in higher cost-of-living areas may be paid more than those in lower

cost-of-living locations for both entry-level and management positions. Understanding which factors impact pay

consistently across all groups of workers and which factors vary by division or job level is necessary to accurately

model pay throughout the firm.

1 For non-exempt employees, some bonuses will also require additional true-up premiums to be paid on all overtime earnings received

during the bonus period.

2   |   www.edgewortheconomics.com

Primer on Wage Analyses for Antitrust Attorneys: Part II

Multi-Firm Complexity: Different firms may value and reward employees’ qualifications and productivity differently

and some firms may base pay on different attributes than others. Allowing for such differences between employers

may be required for studies comparing pay across firms competing in the same labor market. However, even if firms

rely on the same factors (e.g. job performance and qualifications), the way those factors are measured and calibrated

can be quite different across companies. For example, Company A has annual reviews where employees receive an

overall performance evaluation on a scale of one to ten, Company B rates employees on a quarterly basis and three

skills, and Company C provides real-time feedback using a categorical (non-numeric) scale. Properly controlling for

factors that are measured differently across employers is important, and the effect of these factors on pay may differ

across employers as well. A model that allows for all of these differences across employers may be necessary to

reliably model pay across firms competing for workers in the same labor market. 

3. Identifying “Comparable” Employees

It is important to identify groups of employees who are comparable with respect to their job duties and

responsibilities. Often job title, division, and pay grade are important controls to distinguish between such groups.

However, sometimes simple groupings of jobs may not be sufficient. The same job title may be used in multiple

divisions, but that job may function differently in ways that affect pay between divisions. In that case, controlling

for job alone may not be sufficient. On the other hand, different divisions may have different job titles for the same

function—and in these firms, it may be necessary to combine employees in different job titles into the same group.

It is important to understand the corporate structure at the firm and how that influences pay.

Even among employees with similar duties and responsibilities, compensation depends on individual factors such

as an employee’s job performance. As noted earlier, job groups may need to be interacted with individual factors

(qualifications and job performance) to allow for differences in the relative importance of individual factors across

different parts of the firm. 

Multi-Firm Complexity: Firms can be organized very differently. For example, Company A uses the job title Data

Analyst, Company B uses Data Analyst and Senior Data Analyst, and Company C uses Data Analyst I, Data Analyst

II, and Data Analyst III. If the pay factors or their relative importance vary between levels of the Data Analyst

position, it does not make sense to combine those titles into a single Data Analyst job, but it’s not immediately

obvious which job titles at each company are directly comparable to titles at the other companies.

4. Addressing Unobserved Factors

Despite the range of firm and individual characteristics found in relevant data sources, not all differences between

employees are captured by available data. Sometimes relevant information is not recorded. For example, one

employee’s prior labor market experience may be closely related to the current job while another employee’s prior

experience was not in similar work. If only the number of years of prior experience is included in the data, the model

cannot capture differences across employees in the quality or relevancy of their prior work experiences. Other

differences may not be quantifiable. Consider two employees who have the same credentials and qualifications, but 

www.edgewortheconomics.com   |   3

Primer on Wage Analyses for Antitrust Attorneys: Part II

one is a more effective collaborator. Their supervisor is aware of the difference and likely makes work assignments

and pay decisions based on that information, but these skills can’t be easily quantified and directly included in a

wage model. The inability to quantify and control for important productivity factors that influence wages means

that wage models might explain less of the variation in wages than would be explained by pricing models in more

traditional price-fixing cases. The inability to control for important productivity factors is important because a

regression model that does not accurately explain and predict wages may yield to incorrect or unreliable conclusions

as to whether a no-poaching agreement caused wage suppression. 

Multi-Firm Complexity: When analyzing pay across firms, which factors are measured or available in the data may

differ between firms. Going back to the example above where one employee is a better collaborator, it may be that

Company A includes collaboration as a skill that is rated on a scale of one to five in performance reviews, Company

B has a free-form question about how well the employee works on a team, and Company C does not have any

information about collaboration in its reviews. Addressing differences in the available information and properly

calibrating that information across firms is important.

Class Certification 

 

Many of the issues discussed in this article in the context of wage determination models are also particularly relevant

for class certification issues in no-poaching cases. No-poaching agreements are likely to impact workers differently

depending on their individual and job characteristics. For example, employees with specialized skills in certain job

functions or departments may be more likely to be recruited by rival firms, while employees with more general

skills may be less likely to be poached. In addition, firms are more likely to be concerned about losing their highest

performing employees to a rival and would be less concerned if a low-performing employee received an outside job

offer from a rival. n

4   |   www.edgewortheconomics.com

About Edgeworth 

Edgeworth Economics provides quantitative and economic consulting in the

course of litigation and business to its clients, which include world-class law

firms, Fortune 500 companies, and government agencies. Edgeworth experts

apply their knowledge and experience, along with state-of-the-art computing

infrastructure, to help clients efficiently manage complex issues. Edgeworth

experts are leaders and teachers from across the industry including PhD

economists, MBAs, statisticians, and programmers. Edgeworth has offices in

Pasadena, San Francisco, Toronto, and Washington, DC.

www.edgewortheconomics.com

Disclaimer:

The opinions expressed herein do not necessarily represent the views of Edgeworth

Economics or any other Edgeworth consultant. This article is intended to inform readers

about legal developments. Nothing in this article should be construed as legal advice or

a legal opinion, and readers should not act upon the information contained in this article

without seeking the advice of legal counsel.

Edgeworth Economics - Dr. Stephen G. Bronars and Dr. Deborah K. Foster

Back Forward
  • Save & file
  • View original
  • Forward
  • Share
    • Facebook
    • Twitter
    • Linked In
  • Follow
    Please login to follow content.
  • Like
  • Instruct

add to folder:

  • My saved (default)
  • Read later
Folders shared with you

Filed under

  • USA
  • Competition & Antitrust
  • Employment & Labor
  • Edgeworth Economics

Popular articles from this firm

  1. Lamictal and the Myth of “Generic” “Pay-for-Delay” Cases *
  2. Benefit of the but-for bargain: Assessing economic tools for data privacy litigation *
  3. Prevailing Wage Preview: H-2B Foreign Worker Salary Expectations for July 2022 *
  4. Edgeworth Client Prevails in Oracle America, Inc. v. Google Inc. *
  5. Prevailing Wage Preview: H-1B Foreign Worker Salary Expectations for July 2022 *

If you would like to learn how Lexology can drive your content marketing strategy forward, please email [email protected].

Powered by Lexology

Related practical resources PRO

  • How-to guide How-to guide: How to assess competition law risks in an agency agreement (UK)
  • How-to guide How-to guide: Understanding antitrust and unfair trade practices law and your organization’s compliance obligations (USA)
  • How-to guide How-to guide: How to draft an antitrust–unfair trade practices compliance program (USA)

Related research hubs

  • USA
  • Competition & Antitrust
  • Employment & Labor
Back to Top
Resources
  • Daily newsfeed
  • Commentary
  • Q&A
  • Research hubs
  • Learn
  • In-depth
  • Lexy: AI search
Experts
  • Find experts
  • Legal Influencers
  • Firms
  • About Instruct Counsel
More
  • About us
  • Blog
  • Events
  • Popular
Legal
  • Terms of use
  • Cookies
  • Disclaimer
  • Privacy policy
Contact
  • Contact
  • RSS feeds
  • Submissions
 
  • Login
  • Register
  • Follow on Twitter
  • Follow on LinkedIn

© Copyright 2006 - 2022 Law Business Research

Law Business Research