THE USE OF THE LORENZ CURVE AND THE PARETO DISTRIBUTION IN INTERNAL PAY STRUCTURING: A RESEARCH NOTE

Abstract

Thisnote presents some findings from the early stages of research into the effectiveness of company pay structures.1The use of the Lorenz curve as a measure of inequality of distribution of a firm's payroll is described. Values forL, the Lorenz coefficient, are presented for the total payroll of a chemical processing firm and for the earnings of manual workers in a medium-heavy engineering company. The use of the Pareto distribution for management salary structuring is demonstrated. Values for α, the Pareto coefficient, are presented for two chemical companies and two engineering firms. Some possible practical uses for such Lorenz and Pareto values are suggested.