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Performance pay, sorting and the dimensions of job satisfaction

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Author Info
John S Heywood
Colin Green

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Abstract

This paper investigates the influence of performance related pay on several dimensions of job satisfaction. In cross-sectional estimates, performance related pay is associated with increased overall satisfaction, satisfaction with pay, satisfaction with job security and satisfaction with hours. It appears to be negatively associated with satisfaction with the work itself. Yet, after accounting for worker fixed-effects, the positive associations remain and the negative association vanishes. These results appear robust to a variety of alternative specifications and support the notion that performance pay allows increased opportunities for worker optimization and do not generally demotivate workers or crowd out intrinsic motivation.

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Paper provided by Lancaster University Management School, Economics Department in its series Working Papers with number 004731.

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Date of creation: 2007
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Handle: RePEc:lan:wpaper:004731

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  1. John S. Heywood & W. S. Siebert & Xiangdong Wei, 2002. "Worker sorting and job satisfaction: The case of union and government jobs," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(4), pages 595-609, July.
  2. Daniel Parent, 1997. "Methods of Pay and Earnings: A Longitudinal Analysis," CIRANO Working Papers 97s-14, CIRANO. [Downloadable!]
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  3. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June. [Downloadable!] (restricted)
  4. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September. [Downloadable!] (restricted)
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  5. John S. Heywood & Uwe Jirjahn & Georgi Tsertsvadze, 2005. "Getting along with Colleagues - Does Profit Sharing Help or Hurt?," Kyklos, Blackwell Publishing, vol. 58(4), pages 557-573, November. [Downloadable!] (restricted)
  6. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 44-49, May. [Downloadable!] (restricted)
  7. Paarsch, H-J & Shearer, B, 1996. "Piece Rates, Fixed Wages, and Incentive Effects : Statistical Evidence From Payroll Records," Papers 9623, Laval - Recherche en Energie.
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  8. Sarah Brown & John G. Sessions, 2003. "Attitudes, Expectations and Sharing," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 17(4), pages 543-569, December. [Downloadable!] (restricted)
  9. Clark, Andrew E. & Oswald, Andrew J. & Warr, Peter B., 1994. "Is job satisfaction u-shaped in age ?," CEPREMAP Working Papers (Couverture Orange) 9407, CEPREMAP.
  10. Gibbons, Robert, 1987. "Piece-Rate Incentive Schemes," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 413-29, October. [Downloadable!] (restricted)
  11. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
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  12. Ewing, Bradley T., 1996. "Wages and performance-based pay: Evidence from the NLSY," Economics Letters, Elsevier, vol. 51(2), pages 241-246, May. [Downloadable!] (restricted)
  13. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January. [Downloadable!] (restricted)
  14. Clark, Andrew E., 2001. "What really matters in a job? Hedonic measurement using quit data," Labour Economics, Elsevier, vol. 8(2), pages 223-242, May. [Downloadable!] (restricted)
  15. Dong-One Kim, 1999. "Determinants of the survival of gainsharing programs," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 53(1), pages 21-42, October.
  16. John Heywood & Uwe Jirjahn & Georgi Tsertsvadze, 2005. "Does profit sharing reduce conflict with the boss? Evidence from Germany," International Economic Journal, Korean International Economic Association, vol. 19(2), pages 235-250, June. [Downloadable!] (restricted)
  17. W.D. McCausland & K. Pouliakas & I. Theodossiou, 2005. "Some are Punished and Some are Rewarded: A Study of the Impact of Performance Pay on Job Satisfaction," Labor and Demography 0505019, EconWPA. [Downloadable!]
  18. 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. [Downloadable!] (restricted)
    Other versions:
  19. Robert W Drago & John S. Heywood, 1995. "The Choice of Payment Schemes: Australian Establishment Data," Working papers _006, University of Wisconsin - Milwaukee. [Downloadable!]
    Other versions:
  20. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Blackwell Publishing, vol. 15(5), pages 589-611, December. [Downloadable!] (restricted)
  21. Uri Gneezy & Aldo Rustichini, 2004. "Gender and Competition at a Young Age," American Economic Review, American Economic Association, vol. 94(2), pages 377-381, May. [Downloadable!] (restricted)
  22. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
  23. David Marsden & Stephen French & Katsuyuki Kubo, 2001. "Does Performance Pay De-Motivate, and Does It Matter?," CEP Discussion Papers 0503, Centre for Economic Performance, LSE. [Downloadable!]
  24. Heywood, John S & Hubler, Olaf & Jirjahn, Uwe, 1998. "Variable Payment Schemes and Industrial Relations: Evidence from Germany," Kyklos, Blackwell Publishing, vol. 51(2), pages 237-57.
  25. W. Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO. [Downloadable!]
  26. Francis Green, 2002. "Why Has Work Effort Become More Intense?," Studies in Economics 0207, Department of Economics, University of Kent. [Downloadable!]
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