Other factors associated with levels could also influence salaries. For instance, a Weberian perspective would suggest that salaries have an authority-maintenance function in organizations, with salaries being adjusted to convey the relative authority of employees. By this explanation, salaries are given, not as compensation, but as concrete and visible symbols of legitimacy to enhance the authority of the position (Collins 1975, Chap. 6; Kluegel 1978; Robinson and Kelley 1979; Wright 1978).
By this view, individuals go through a two-stage process that determines their earnings. First they are allocated to a level (specifically, a particular job which is categorized at a particular level in the organizational hierarchy). Since salary ranges are assigned to these levels, this first stage effectively determines a salary range for individuals.
In the second stage, individuals are assigned a particular salary with-in the range of salaries specified for the level. At this stage, individuals are no longer being judged relative to all others in the firm, for the range of salaries is already determined for the employees at each level. Rather, individuals are judged relative to their immediate peers in the same level.
This two-stage model is quite close to the actual salary determination practices which are described in the management literature and which are applied in many firms. In other words, job evaluation systems effectively stratify jobs into distinct levels and provide ways of assigning salary ranges to these levels. According to this literature, individuals' salaries are determined first by the evaluation of their jobs (and the associated salary range) and then by their performance and qualifications relative to those of others in the same job or level. Many governmental civil service systems have implemented two-stage procedures similar to this, as have many large and middle-sized corporations.
Marginal productivity theory would predict that these status considerations would be eliminated by market competition. However, if productivity cannot be judged, and if all competitors share the belief in these status considerations; then competition may not occur in this sector of the labor market.
This two-stage model requires some changes in how the earnings determination process in organizations has been conceptualized thus far in this article. Earnings have been portrayed as a function of individual characteristics in a one-stage process; and, in so doing, two separate processes were subsumed into an over-simplified single descriptive analysis. However, this model ignores the job evaluation sys-tem and its associated level system, which together stratify some of the variation in salaries according to the nature and qualities of jobs, not according to the characteristics and abilities of the individuals who fill them.
Thus, instead of a one-stage model which explains salaries on the basis of individual characteristics and capacities, a two-stage model is now posited: One component of individuals' salaries is determined by the level to which an individual is allocated, and a second component is determined by salary evaluations of the individual within that job. Both stages may be functions of individual characteristics and capabilities, but the two components are conceptually and empirically separate processes, and they may be influenced by particular individual characteristics in different ways and at different times.
In the present analysis, the structurally determined component of salaries is conceived as being the result of the level hierarchy of the organization. Of course, this is a simplifying assumption: It ignores other selection systems which may also contribute to the salary structure,11 and it ignores antecedent selection and evaluation processes which may contribute to the nature and operation of the level hierarchy. However, for present purposes, an understanding of the two-stage model is attempted through a description of the operation of the level selection system as a distinct system, the ways that the level selection system contributes to the salary structure, and the ways that individual characteristics influence salaries independent of the level system.
The analyses required for the first stage in examining the influences of personal characteristics on levels have already been conducted. The second stage calls for analysis of the influence of levels and personal characteristics on earnings.
The central conclusion to emerge from these findings is that the various colleges, which have very substantial influences on earnings- particularly in the later years-have virtually no influence independent of levels. In other words, the level system embodies precisely that component of earnings variation that colleges explain.
Thus, in a model in which level is allowed to mediate the influence of individual characteristics on earnings, these findings indicate that very little of the influence of entry age on earnings is affected. Entry age has a negative influence on both levels and earnings (in the later periods), but controlling for levels does not reduce its influence on earnings very much. On the other hand, these findings indicate that levels mediate most of the influence of tenure and non-B.A., and they mediate virtually all of the influence of the various colleges.
When combined with the results of the previous analyses, these findings reveal some important characteristics of the level system and its operation. The progression of individuals from level to level seems to operate by some clear processes. Individuals' level attainments at any period are strongly influenced by their previous level attainments. This is not merely a matter of non-mobility, for the actual attainments in this cohort increase dramatically over these intervals. Despite large amounts of mobility, the employees who had attained the highest levels in one period tend to be at the highest levels in the next period. The individual characteristics that influence early level allocations are built into the level system and preserved into the future. For instance, the favored colleges affect initial levels and give an additional benefit between 1962 and 1965. Thereafter, their effect is carried forward into later periods without any further additional impact. Thus individuals are systematically allocated to these level classifications on the basis of some criteria and not others, these selections systematically operate at some times and not at later times, and individuals are systematically transferred between level classifications from one time to the next. These patterns suggest that the level classifications are indicators of a real system.
Human capital theory does relatively well at explaining the gradually emerging and gradually increasing influence of many of the individual characteristics on earnings in a one-stage model. However, the analyses also suggest some reasons for doubting the one-stage model, and human capital theory fares much less well in the two-stage model. Human capital theory has only minimal value in explaining the determinants of level attainment. Its prediction of gradually emerging and gradually increasing influences does not hold for levels, which show initially large college effects and a sudden discontinuation of additional college effects. Since levels explain the greatest portion of earnings variance, the human capital theory has minimal explanatory value if one accepts the two-stage model.
The particular coefficients are consistent with those of the few pre-vious studies which have considered the relationship of levels to earnings (Malkiel and Malkiel 1973; Halaby 1978). However, the present study, in considering a more diverse sample (in terms of education, occupation, and level attainments) and in considering additional independent variables (entry age and colleges), is not exactly comparable to those studies.
Although problems of inferring generalizability are created by focusing on a single organization, this approach has permitted a detailed analysis of the social entity in which earnings are determined and careers defined. It has permitted this study to investigate some of the status characteristics of individuals which influence career attainment and to discern some of the organizational processes which determine earnings and define career attainment. While the details may differ in other settings, the general ways that the organizational level hierarchy structures and defines limits for career attainment are likely to be generalizable beyond this corporation. Although analysts of stratification may have difficulty in studying such mechanisms using the survey methods customarily employed in stratification research, the possibility that comparable mechanisms underlie many stratification phenomena in social institutions cannot be ignored.
This analysis also complements White's (1970a) analysis of vacancy movements in hierarchies, for it shows the net results of vacancy-chain processes and organizational selection processes. Moreover, like White's analysis, this analysis suggests that the operation of the hierarchical structure is fundamental in defining careers in organizations. The implications for policy reform in organizations are clear. Reforms to improve career opportunities within organizations must consider the operation of the organizational level hierarchy. By themselves, changes in individual characteristics (e.g., improved education) or changes in the compensation returns for individual characteristics are likely to create only small increases in earnings. Only if these changes are accompanied by improvements in position in the level hierarchy-particularly improvements which occur early in individuals' careers-will they lead to significant increases in earnings and career opportunities.
