Organization or Market Oriented HRM Practices? Examining Their Effects on Employee Wages

Abstract

Despite growing research interest in the role of human resource management (HRM) practices in affecting societal-level income inequality, researchers have not reached consensus regarding whether and what HRM practices affect employee wages. Integrating human capital and efficiency wage theories with a strategic human resource management (SHRM) perspective, we argue that high involvement work practices (HIWPs), which reflect an “organization- oriented” HRM approach, is positively associated with full-time employee wages. In contrast, the usage of permanent part-time workers, which indicates a “market-oriented” HRM approach, is negatively associated with full-time employee wages. A mixed model analysis of a large, national sample of Canadian businesses supports most of our hypotheses. The findings shed lights on SHRM and other wage theories and provide a foundation for further research on the association between HRM practices and income inequality.