Does Performance Pay Influence Hours of Work? (original) (raw)

Performance Pay and the "Time Squeeze

2007

Earlier studies of the impact of performance pay on individuals’ behavior have primarily been concerned with the effects on their earnings and productivity. The productivity increases associated with the adoption of performance pay practices may, however, come at the expense of quality of life at or outside work. In this paper we study the effect on the employees’ out-of-work activities, testing whether performance pay contracts lead to a “time squeeze” for non-work activities. In doing so, we distinguish between two effects, a substitution effect and a discretion effect. On the one hand, since the marginal payoff to work is higher under a performance pay contract, employees will work more and spend less time on private activities (substitution effect). On the other hand, to the extent that employees have some choice over their work hours, if employees are more productive they can do the same job in less time and have more spare time for private activities (discretion effect). We di...

Wages and the Allocation of Hours and Effort

1999

We thank Jang-Ok Cho, Pete Klenow, and participants at several workshops for helpful comments. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.

Performance pay and productivity of low- and high-ability workers

Labour Economics, 2010

Existing literature has mainly focused on analyses of the overall effect of a change in the incentive scheme. Lazear , "Performance pay and productivity", American Economic Review, 90, 1346-1361, for example, estimates the average increase in productivity after a firm switches from an hourly-wage scheme to a piece-rate plus basic-wage scheme. His paper does not, however, account for the fact that many workers remained within the basic-wage range after the change was made in the incentive scheme. In the present paper we explore how the incentive effect might have been different for those workers seeking the basic wage, and those workers seeking the piece-rate component of the wage. Interestingly, the change in productivity is approximately the same in percentage terms for both types of workers. (S. Galiani). 1 See Lazear (1986) on the incentive and selection effects of piece-rate contracts, Holmstrom and Milgrom (1991) on multitask principal-agent contracts, Baker (1992) for performance measurements and Gibbons (1987) for the ratchet effect.

The Tenuous Relationship between Effort and Performance Pay

2012

When a worker is offered performance related pay, the incentive effect is not only determined by the shape of the incentive contract, but also by the probability of contract enforcement. We show that weaker enforcement may reduce the worker's effort, but lead to higher-powered incentive contracts. This creates a seemingly negative relationship between effort and performance pay.

On-The-Job Tasks and Performance Pay: A Vacancy-Level Analysis

2010

Drawing on a dataset of job openings posted at an online job board, the authors find that employers are less likely to offer performance-based pay when a job entails multitasking, quality control, or team work than when a job does not entail these tasks. This finding is consistent with the notion that when employers have difficulty measuring a worker’s overall

Paying for what kind of Performance? Performance Pay and Multitasking in Mission-Oriented Jobs

SSRN Electronic Journal

Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

The psychological role of pay systems in choosing to work more hours

Human Resource Management Review, 2014

Psychological and economic perspectives are blended to model aspects of pay systems that dispose employees to work more hours beyond what would be predicted by economically rational exchange alone. Three pay-system triggers and their respective paths to more work are expounded: 1) pay equated to units of time, 2) pay contingent on subjective performance standards, and 3) pay growth determined by tournament pay structures. The effects are conceived as self-reinforcing due to loss aversion stemming from endowment of income and sunk cost bias. Also considered are implications for human capital, a posed curvilinear relationship that holds practical relevance for organizational sustainability-i.e., maintenance of the firm's human capital over the long term. j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / h u m r e s

Performance pay, competitiveness, and the gender wage gap: Evidence from the United States

Economics Letters, 2015

Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

Performance Pay and Wage Inequality *

Quarterly Journal of Economics, 2009

An increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using a bonus, a commission, or a piece rate. In this paper, we look at the e¤ect of the growing incidence of performance pay on wage inequality. The basic premise of the paper is that performance pay jobs have a more "competitive" pay structure that rewards productivity di¤erences more than other jobs. Consistent with this view, we show that compensation in performance pay jobs is more closely tied to both measured (by the econometrician) and unmeasured productive characteristics of workers. We conclude that the growing incidence of performance pay accounts for 25 percent of the growth in male wage inequality between the late 1970s and the early 1990s.