The Politicization of Wage Setting

Political realignment in America has reshuffled party affiliations across occupational lines. Increasingly the party of unions and minimum wages is also the party of managers and professionals. In this article, we investigate whether this realignment among the actors setting wages within firms has politicized wage setting. We first show that Democrat managers pay more to hourly workers, even comparing across firms within metro-occupation-industry-year local labor markets. This premium is confined to senior managers and human resources and compensation managers; a placebo test shows that operations managers' political affiliation is uncorrelated with wage levels. We then show, consistent with coalitional behavior, that the Democrat wage premium is larger for Democrat-leaning service jobs than for increasingly Republican blue-collar workers, and larger for women than for men. Democrat managers raise pay more around salient minimum wage increases and become relatively more likely to pay $15 wages specifically. In an experiment in which manager-employee partisan match is randomly assigned, managers are 10 percentage points more likely to assign co-partisans a higher wage. Finally, we show that the Democrat wage premium has grown in recent years, and that this accounts for 12% of extra wage increases for low-wage workers during this period. Taken together, these results suggest a politicization of wage-setting, wherein managers' liberal commitments benefit frontline workers in their political coalition.