So far we have established that compensation represents an employment contract, and is important to employees, organizations, and the economy. But what class of variable does it represent? In what scholarly discipline does it belong? What kind of theory is applicable to it?
Compensation as a political concept involves the use of power and influence. Organizations, unions, groups, and individual employees all use their power to influence pay. Unions exert influence at the time the contract is bargained and during the life of the contract through the grievance procedure. Similarly, compensation in unionized organizations influences that in nonunion organizations. Organizations exert power in the same situations. In addition, some choose to be pay leaders and thus become major forces in labor markets. Within organizations, groups try to use their power to enhance their influence and pay. As organizations acquire more differentiated but interdependent units, more and more individuals achieve power to influence compensation. Highly skilled individuals in demand by other employers also have the power to influence their pay. Compensation as a political concept involves no notion that the parties have equal power. Nor does all the power reside on the side of the organization. A political perspective stresses accommodating the influence of all parties.
