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(Not)Hanging on the Telephone: Payment systems in the New Sweatshops

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  • Sue Fernie
  • David Metcalf
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    Abstract

    'The ultimate objective of empirical work on incentives should be to find out why firms use the compensation systems they doàhuge advances in our understanding could be made by a concerted effort to collect data on contracts.' So concludes the 1998 Journal of Economic Literature survey on compensation systems. This paper does just that. It presents very detailed case study evidence on contracts in four organizations, three of which are call centres, the fastest growing sector of employment in the UK. This evidence is used to test predictions from the New Economics of Personnel (NEP) concerning the incidence of payment systems. We also contrast and test predictions from NEP with those of the earlier British Institutional School, which anticipated many of NEP's ideas on payment systems. Variations in the ratio of performance-related to basic pay among our organizations can, broadly, be explained by the costs and benefits of monitoring inputs and measuring output, which comprises the core of NEP. Indeed, the monitoring of our case study employees is the theme which binds the paper together û for call centres Jeremy Bentham's 1791 Panopticon was truly the vision of the future.

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    File URL: http://cep.lse.ac.uk/pubs/download/DP0390.pdf
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    Bibliographic Info

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0390.

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    Date of creation: May 1998
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    Handle: RePEc:cep:cepdps:dp0390

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    Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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    1. Booth, Alison L & Frank, Jeff, 1997. "Performance-Related Pay," CEPR Discussion Papers 1593, C.E.P.R. Discussion Papers.
    2. William E. Encinosa, III & Martin Gaynor & James B. Rebitzer, . "The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems," GSIA Working Papers 49, Carnegie Mellon University, Tepper School of Business.
    3. Seiler, Eric, 1984. "Piece Rate vs. Time Rate: The Effect of Incentives on Earnings," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 363-76, August.
    4. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
    5. Robert Drago & John S. Heywood, 1994. "The Choice of Payment Schemes: Australian Establishment Data," Labor and Demography 9402001, EconWPA, revised 04 Feb 1994.
    6. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
    7. Gregg, Paul & Wadsworth, Jonathan, 1995. "A Short History of Labour Turnover, Job Tenure, and Job Security, 1975-93," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 73-90, Spring.
    8. Parsons, Donald O., 1987. "The employment relationship: Job attachment, work effort, and the nature of contracts," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 14, pages 789-848 Elsevier.
    9. Canice Prendergast, 1998. "What Happens within Firms? A Survey of Empirical Evidence on Compensation Policies," NBER Chapters, in: Labor Statistics Measurement Issues, pages 329-356 National Bureau of Economic Research, Inc.
    10. Drago, Robert & Heywood, John S, 1992. "Is Worker Behaviour Consistent with Efficiency Wages?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(2), pages 141-53, May.
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    Cited by:
    1. Green, Francis & McIntosh, Steven, 2001. "The intensification of work in Europe," Labour Economics, Elsevier, vol. 8(2), pages 291-308, May.

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