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Wages and incentives in the late 19th and early 20th century Australian Banking Industry

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  • Seltzer, Andrew

Abstract

This paper summarises research on the mechanisms used by banks to align the interests of their workers with the goal of long-term profit maximization. Banking was characterised by moral hazard, and the monitoring technology of the period was far from perfect. The banks incentivized the workers by establishing well-defined career structures within internal labour markets, by strongly tying salary to tenure and attaching large salary increases to promotion. A worker who quit or was dismissed was punished with a considerable loss of lifetime earnings. Conversely, one who exceeded the norms was rewarded by substantial earnings growth associated with seniority and promotion.

Suggested Citation

  • Seltzer, Andrew, 2011. "Wages and incentives in the late 19th and early 20th century Australian Banking Industry," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 1(1), pages 11-26.
    • Handle: RePEc:gok:ijdcv1:v:1:y:2011:i:1:p:11-26
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    File URL: http://www.worldscientific.com/doi/pdf/10.1142/S2010269011000063
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