Advanced Search
MyIDEAS: Login to save this paper or follow this series

Some are Punished and Some are Rewarded: A Study of the Impact of Performance Pay on Job Satisfaction

Contents:

Author Info

  • W.D. McCausland

    (University of Aberdeen)

  • K. Pouliakas

    (University of Aberdeen)

  • I. Theodossiou

    (University of Aberdeen)

Abstract

Using an econometric procedure that corrects for both self-selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance- related pay (PRP) compared to those on alternative compensation plans. Using data from four waves of the British Household Panel Survey (BHPS), it is found that PRP exerts a positive effect on the mean job satisfaction of (very) high-paid workers only. A potential explanation for this pattern could be that for lower-paid employees PRP is perceived to be controlling, whereas higher-paid workers derive a utility benefit from what they regard as supportive reward schemes. Using PRP as an incentive device in the UK could therefore be counterproductive in the long run for certain low-paid occupations.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://128.118.178.162/eps/lab/papers/0505/0505019.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0505019.

as in new window
Length: 41 pages
Date of creation: 24 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0505019

Note: Type of Document - pdf; pages: 41
Contact details of provider:
Web page: http://128.118.178.162

Related research

Keywords: Performance-related pay; job satisfaction; self-selection;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  2. Clark, A.E., 1995. "Job Satisfaction and Gender: Why Are Women so Happy at Work?," DELTA Working Papers 95-10, DELTA (Ecole normale supérieure).
  3. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  4. Daniel Parent, 1997. "Methods of Pay and Earnings: A Longitudinal Analysis," CIRANO Working Papers 97s-14, CIRANO.
  5. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
  6. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-64, May.
  7. Charles Brown, 1992. "Wage Levels and Method of Pay," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 366-375, Autumn.
  8. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 447-63, July.
  9. 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.
  10. Goldin, Claudia, 1986. "Monitoring Costs and Occupational Segregation by Sex: A Historical Analysis," Scholarly Articles 2666727, Harvard University Department of Economics.
  11. Grund, Christian & Sliwka, Dirk, 2001. "The Impact of Wage Increases on Job Satisfaction - Empirical Evidence and Theoretical Implications," IZA Discussion Papers 387, Institute for the Study of Labor (IZA).
  12. Clark, Andrew E. & Oswald, Andrew J., 1994. "Satisfaction and comparison income," CEPREMAP Working Papers (Couverture Orange) 9408, CEPREMAP.
  13. Robert Drago & John S. Heywood, 1994. "The Choice of Payment Schemes: Australian Establishment Data," Labor and Demography 9402001, EconWPA, revised 04 Feb 1994.
  14. Richard B. Freeman, 1977. "Job Satisfaction as an Economic Variable," NBER Working Papers 0225, National Bureau of Economic Research, Inc.
  15. Konstantinos Pouliakas & Ioannis Theodossiou, 2005. "Socio-Economic Differences in the Perceived Quality of High and Low-Paid Jobs in Europe," Labor and Demography 0506002, EconWPA.
  16. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  17. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  18. Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA).
  19. Rannia Leontaridi & Peter Sloane, 2001. "Measuring The Quality Of Jobs," LoWER Working Papers wp7, AIAS, Amsterdam Institute for Advanced Labour Studies.
  20. Bruno S. Frey & Reto Jegen, 2000. "Motivation Crowding Theory: A Survey of Empirical Evidence," CESifo Working Paper Series 245, CESifo Group Munich.
  21. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
  22. Gardner, Jonathan & Oswald, Andrew J., 2001. "What Has Been Happening to the Quality of Workers’ Lives in Britain?," The Warwick Economics Research Paper Series (TWERPS) 617, University of Warwick, Department of Economics.
  23. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  24. David Marsden & R Richardson, 1992. "Motivation and Performance Related Pay in the Public Sector: A Case Study of the Inland Revenue," CEP Discussion Papers dp0075, Centre for Economic Performance, LSE.
  25. Theodossiou, I., 1998. "The effects of low-pay and unemployment on psychological well-being: A logistic regression approach," Journal of Health Economics, Elsevier, vol. 17(1), pages 85-104, January.
  26. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 19(2), pages 285-300, Summer.
  27. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
  28. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  29. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
  30. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," The Centre for Market and Public Organisation 03/071, Department of Economics, University of Bristol, UK.
  31. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  32. Arnaud Chevalier & Reamonn Lydon, 2002. "Estimates of the Effect of Wages on Job Satisfaction," CEP Discussion Papers dp0531, Centre for Economic Performance, LSE.
  33. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  34. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-33, June.
  35. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  36. Drakopoulos, S. A. & Theodossiou, I., 1997. "Job satisfaction and target earnings," Journal of Economic Psychology, Elsevier, vol. 18(6), pages 693-704, November.
  37. 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.
  38. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June.
  39. van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
  40. repec:rus:hseeco:124059 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2012. "Rewarding carrots and crippling sticks: Eliciting employee preferences for the optimal incentive design," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1247-1265.
  2. Cornelissen, Thomas & Heywood, John S. & Jirjahn, Uwe, 2011. "Performance pay, risk attitudes and job satisfaction," Labour Economics, Elsevier, vol. 18(2), pages 229-239, April.
  3. Konstantinos Pouliakas & Ioannis Theodossiou, 2005. "Socio-Economic Differences in the Perceived Quality of High and Low-Paid Jobs in Europe," Labor and Demography 0506002, EconWPA.
  4. Benjamin Artz, 2010. "Fringe benefits and job satisfaction," International Journal of Manpower, Emerald Group Publishing, vol. 31(6), pages 626-644, September.
  5. repec:lan:wpaper:2928 is not listed on IDEAS
  6. Pouliakas, Konstantinos, 2010. "Pay Enough, Don't Pay Too Much or Don't Pay at All? The Impact of Bonus Intensity on Job Satisfaction," IZA Discussion Papers 4713, Institute for the Study of Labor (IZA).
  7. Azman ISMAIL & Nurhana M RAFIUDDIN & Mohd Hamran MOHAMAD & Norashikin Sahol HAMID & Aniza WAMIN & Nurzawani ZAKARIA, 2011. "Performance Based Pay As A Determinant Of Job Satisfaction: A Study In Malaysia Giatmara Centers," Management and Marketing Journal, University of Craiova, Faculty of Economics and Business Administration, vol. 0(1), pages 77-88, May.
  8. repec:lan:wpaper:3020 is not listed on IDEAS
  9. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Rewarding Carrots & Crippling Sticks: Eliciting Employee Preferences for the Optimal Incentive Mix in Europe," MPRA Paper 14167, University Library of Munich, Germany.
  10. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees," MPRA Paper 14244, University Library of Munich, Germany.
  11. repec:lan:wpaper:2926 is not listed on IDEAS
  12. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2005. "Socio-Economic Differences in the Satisfaction of High-Pay and Low-Pay Jobs in Europe," MPRA Paper 16733, University Library of Munich, Germany, revised 10 Aug 2009.
  13. Benjamin Artz, 2008. "Fringe Benefits and Job Satisfaction," Working Papers 08-03, UW-Whitewater, Department of Economics.
  14. Fidan Ana Kurtulus & Douglas Kruse & Joseph Blasi, 2011. "Worker Attitudes Towards Employee Ownership, Profit Sharing and Variable Pay," UMASS Amherst Economics Working Papers 2011-15, University of Massachusetts Amherst, Department of Economics.
  15. C Green & J S Heywood, 2007. "Performance pay, sorting and the dimensions of job satisfaction," Working Papers 584041, Lancaster University Management School, Economics Department.
  16. repec:lan:wpaper:3175 is not listed on IDEAS
  17. Federica Origo & Laura Pagani, 2006. "Is Work Flexibility a Stairway to Heaven? The Story Told by Job Satisfaction in Europ," Working Papers 97, University of Milano-Bicocca, Department of Economics, revised Jun 2006.
  18. Pouliakas, Konstantinos, 2008. "Pay enough, don’t pay too much or don’t pay at all? An empirical study of the non-monotonic impact of incentives on job satisfaction," MPRA Paper 10031, University Library of Munich, Germany.
  19. Pouliakas, Konstantinos & Theodoropoulos, Nikolaos, 2009. "Performance Pay as an Incentive for Lower Absence Rates in Britain," MPRA Paper 18238, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpla:0505019. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.