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Do Employees Profit from Profit Sharing? Evidence from Canadian Panel Data

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Author Info

  • Long, Richard J.

    ()
    (University of Saskatchewan)

  • Fang, Tony

    ()
    (Monash University)

Abstract

Using panel data from a large sample of Canadian establishments, this paper examines whether employee earnings increase, decrease, or do not change in the period subsequent to adoption of profit sharing, relative to establishments that do not adopt profit sharing. Our research contributes to knowledge by utilizing longitudinal analysis to assess the effects of profit sharing adoption on employee earnings growth within a carefully constructed sample of Canadian establishments, and by assessing both cash real earnings growth and total real earnings growth, while controlling for a wide array of variables that may affect these results. On average, employees in Canadian establishments that adopted profit sharing during 1999-2001 appeared to benefit from the introduction of profit sharing, in terms of both their cash real earnings growth and total real earnings growth, in the five-year span following introduction of profit sharing. This advantage was both statistically and practically significant, adding about 15 percentage points to real employee earnings growth over the five-year period, a period during which employee earnings growth was generally modest.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6749.

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Length: 47 pages
Date of creation: Jul 2012
Date of revision:
Publication status: published in: Industrial and Labor Relations Review, 2012, 65 (4), 899-927
Handle: RePEc:iza:izadps:dp6749

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Keywords: firm-worker linked survey; employee earnings; profit sharing plans; Canada;

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References

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  1. Michel Magnan & Sylvie St-Onge, 2005. "The Impact of Profit Sharing on the Performance of Financial Services Firms," Journal of Management Studies, Wiley Blackwell, vol. 42(4), pages 761-791, 06.
  2. Hart, Robert A & Hubler, Olaf, 1991. "Are Profit Shares and Wages Substitute or Complementary Forms of Compensation?," Kyklos, Wiley Blackwell, vol. 44(2), pages 221-31.
  3. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  4. FitzRoy, Felix R & Kraft, Kornelius, 1986. "Profitability and Profit-Sharing," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 113-30, December.
  5. Michael J. Handel & Maury Gittleman, 1999. "Is There a Wage Payoff to Innovative Work Practices?," Economics Working Paper Archive wp_288, Levy Economics Institute.
  6. Wadhwani, Sushil & Wall, Martin, 1990. "The Effects of Profit-Sharing on Employment, Wages, Stock Returns and Productivity: Evidence from UK Micro-data," Economic Journal, Royal Economic Society, vol. 100(399), pages 1-17, March.
  7. Abdurrahman Aydemir & Mikal Skuterud, 2008. "The Immigrant Wage Differential within and across Establishments," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 61(3), pages 334-352, April.
  8. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August.
  9. Derek C. Jones & Panu Kalmi & Antti Kauhanen, 2010. "Teams, Incentive Pay, and Productive Efficiency: Evidence From A Food-Processing Plant," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(4), pages 606-626, July.
  10. Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps.
  11. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  12. Omar Azfar & Stephan Danninger, 2001. "Profit sharing, employment stability, and wage growth," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(3), pages 619-630, April.
  13. Bell, Linda A & Neumark, David, 1993. "Lump-Sum Payments and Profit-Sharing Plans in the Union Sector of the United States Economy," Economic Journal, Royal Economic Society, vol. 103(418), pages 602-19, May.
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Cited by:
  1. Noélie Delahaie & Richard Duhautois, 2013. "L'impact des dispositifs collectifs de partage des bénéfices sur les rémunérations en France. Une analyse empirique sur la période 1999-2007," Working Papers halshs-00967479, HAL.
  2. Long, Richard J. & Fang, Tony, 2013. "Profit Sharing and Workplace Productivity: Does Teamwork Play a Role?," IZA Discussion Papers 7869, Institute for the Study of Labor (IZA).

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