Wage compression is defined as which description?

• A. Wage growth accelerates with years of service
• B. Wage growth early in career that tapers off near the top of the salary scale
• C. Wage stagnation across the board
• D. Salary increases only with promotions

Answer: (B)

Wage compression happens when the pay difference between less experienced and more experienced workers narrows. This usually occurs when starting salaries are pushed up to attract talent, while raises for long-tenured employees don’t keep pace, so the gap closes over time. The description of wage growth that is rapid early in a career and then tapers off as you reach the top of the salary scale directly reflects this pattern—the early boosts raise entry and mid-level pay enough that the traditional spread to senior levels becomes smaller. This situation often arises with market-driven starting salaries or fixed pay scales that don’t adjust upward as employees advance.

Other patterns don’t describe the same narrowing of the pay range. If wages grew more with tenure, the gap would widen rather than compress. If wages stagnated across the board, there would be little or no compression. If increases only came with promotions, the gaps could become irregular rather than the characteristic early rise followed by leveling off near the top.