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Piece Work Pay and Hourly Pay over the Cycle

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  • Hart, Robert A.

    ()
    (University of Stirling)

Abstract

This paper investigates the relative cyclical behavior of the pay of piece workers and hourly paid workers. It uses a unique data set of blue-collar workers in British engineering between 1926 and 1966. The statistics are obtained from the payrolls of firms belonging to the Engineering Employers Federation (EEF). Roughly, the EEF accounted for one-third of the total engineering workforce. The data consist of cell averages delineated by 15 occupations in 29 engineering districts. Via a firm-union bargaining modelling structure, the question is examined as to likely earnings responses to price shocks under the two payment systems. The empirical work entails testing for cyclical differences in the two payments methods Insights are gained from distinguishing between the relatively tight post-war and slack pre-war labor markets.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2210.

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Length: 32 pages
Date of creation: Jul 2006
Date of revision:
Publication status: published in: Labour Economics, 2008, 15(5), 1006-1022
Handle: RePEc:iza:izadps:dp2210

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Keywords: business cycle; hourly pay; piece work pay;

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References

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  1. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
  2. Robert A. Hart, 2006. "Worker-Job Matches, Job Mobility and Real Wage Cyclicality," Economica, London School of Economics and Political Science, vol. 73(290), pages 287-298, 05.
  3. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  4. Lutz Bellmann & Uwe Blien, 2001. "Wage curve analyses of establishment data from western Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 851-863, July.
  5. Fama, Eugene F, 1991. "Time, Salary, and Incentive Payoffs in Labor Contracts," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 25-44, January.
  6. Charles Brown, 1990. "Firms' choice of method of pay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-182, February.
  7. Ben S. Bernanke, 1985. "Employment, Hours, and Earnings in the Depression: An Analysis of EightManufacturing Industries," NBER Working Papers 1642, National Bureau of Economic Research, Inc.
  8. Paul J. Devereux, 2001. "The Cyclicality of real wages within employer-employee matches," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 835-850, July.
  9. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc.
  10. Ben S. Bernanke & James Powell, 1986. "The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Prewar and Postwar Eras," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 583-638 National Bureau of Economic Research, Inc.
  11. Paul J. Devereux & Robert A. Hart, 2006. "Real wage cyclicality of job stayers, within-company job movers, and between-company job movers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(1), pages 105-119, October.
  12. Hart, Robert A., 2003. "General Human Capital and Employment Adjustment in the Great Depression: Apprentices and Journeymen in UK Engineering," IZA Discussion Papers 799, Institute for the Study of Labor (IZA).
  13. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
  14. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  15. 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.
  16. Hart,Robert A. & Moutos,Thomas, 2008. "Human Capital, Employment and Bargaining," Cambridge Books, Cambridge University Press, number 9780521061032, November.
  17. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October.
  18. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  19. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
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Cited by:
  1. Anger, Silke, 2007. "The cyclicality of effective wages within employer-employee matches: evidence from German panel data," Working Paper Series 0783, European Central Bank.
  2. Hart, Robert A & Roberts, J Elizabeth, 2013. "Industrial composition, methods of compensation, and real earnings in the Great Depression," Stirling Economics Discussion Papers 2013-03, University of Stirling, Division of Economics.
  3. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer-Employee Matches in a Rigid Labor Market," IZA Discussion Papers 5489, Institute for the Study of Labor (IZA).
  4. Hart, Robert A. & Roberts, J. Elizabeth, 2010. "Real Wages, Working Time, and the Great Depression: What Does Micro Evidence Tell Us?," IZA Discussion Papers 4977, Institute for the Study of Labor (IZA).

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