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Worker Cooperation and the Ratchet Effect

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Author Info
Carmichael, H Lorne
MacLeod, W Bentley

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Abstract

Workers paid by the piece should be happy to introduce new techniques that increase output, but firms always seem to reduce the piece rate when workers start earning too much money. Workers respond by restricting output and keeping good new ideas to themselves. We show that this outcome is inevitable in a competitive environment. However, there are noncompetitive situations where firms can use piece rates to get cooperation from their workers. These predictions are consistent with case history evidence from the cotton spinning industry in England in the nineteenth century and the Lincoln Electric Company in the United States even today. Copyright 2000 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 18 (2000)
Issue (Month): 1 (January)
Pages: 1-19
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Handle: RePEc:ucp:jlabec:v:18:y:2000:i:1:p:1-19

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  1. Avner Ben-Ner & Fanmin Kong & Stephanie Lluis, . "Uncertainty and Organization Design," Working Papers 0107, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
  2. Bingley, Paul & Eriksson, Tor, 2001. "Pay Spread and Skewness, Employee Effort and Firm Productivity," Working Papers 01-2, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
    Other versions:
  3. Joshua Herries & Daniel I. Rees & Jeffrey S. Zax, 2003. "Interdependence in worker productivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 585-604. [Downloadable!]
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