Final answer:
The situation where Sandra, with 20 years of experience, earns less than Pete, with 1.5 years of experience, is an example of pay compression, which occurs when there isn't a significant pay difference between employees of differing experience levels.Option A is the correct answer.
Step-by-step explanation:
Comparing the salaries of Sandra and Pete, where Sandra earns $88,000 per year with 20 years of experience, while Pete earns $90,000 per year with only 1.5 years at the company, this is an example of A. Pay compression. Pay compression occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority. This situation creates a scenario where the longer-tenured employee (Sandra) isn't earning significantly more than the newer employee (Pete) despite her extensive experience and loyalty to the company.
The scenario illustrates pay compression, evident in the marginal difference between Sandra and Pete's salaries despite substantial variations in experience. Sandra, with 20 years of service, earns $88,000, whereas Pete, with only 1.5 years, earns $90,000. Pay compression often arises when salary differentials fail to adequately reflect employees' skills, experience, or tenure. In this case, Sandra's extensive expertise and loyalty to the company are not adequately rewarded, creating a potential demotivating factor for long-tenured employees. Pay compression challenges the traditional notion of increased compensation for experience and tenure, emphasizing the need for organizations to address these disparities to maintain employee morale and equity.