IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v66y2014i3p798-823..html
   My bibliography  Save this article

Performance pay and ethnic earnings differences in Britain

Author

Listed:
  • Colin P. Green
  • John S. Heywood
  • Nikolaos Theodoropoulos

Abstract

In the first British study, we show that the ethnic earnings gap amongst performance pay jobs is smaller than that amongst time rate jobs. This partially reflects sorting but persists with diminished magnitude in fixed effect estimates. Although varying somewhat with specification, quantile decompositions show that the smaller ethnic earnings gap is driven by bonus payments in the upper middle portion of the earnings distribution. These findings differ dramatically from those for the USA in which performance pay has been associated with larger negative racial differentials especially at the top of the earnings distribution.

Suggested Citation

  • Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2014. "Performance pay and ethnic earnings differences in Britain," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 798-823.
    • Handle: RePEc:oup:oxecpp:v:66:y:2014:i:3:p:798-823.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gpt035
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 1-49.
    2. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    3. John S. Heywood & Daniel Parent, 2012. "Performance Pay and the White-Black Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 249-290.
    4. Tony Fang & John S. Heywood, 2010. "Immigration, Ethnic Wage Differentials and Output Pay in Canada," British Journal of Industrial Relations, London School of Economics, vol. 48(1), pages 109-130, March.
    5. Stewart, Mark B, 1983. "Racial Discrimination and Occupational Attainment in Britain," Economic Journal, Royal Economic Society, vol. 93(371), pages 521-541, September.
    6. John S. Heywood & Patrick L. O’Halloran, 2005. "Racial Earnings Differentials and Performance Pay," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    7. Stephen Pudney & Michael Shields, 2000. "Gender, race, pay and promotion in the British nursing profession: estimation of a generalized ordered probit model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(4), pages 367-399.
    8. Méon, Pierre-Guillaume & Szafarz, Ariane, 2011. "The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions," Labour Economics, Elsevier, vol. 18(4), pages 487-497, August.
    9. Blackaby, D.H. & Leslie, D.G. & Murphy, P.D. & O'Leary, N.C., 2005. "Born in Britain: How are native ethnic minorities faring in the British labour market?," Economics Letters, Elsevier, vol. 88(3), pages 370-375, September.
    10. Christian Dustmann & Nikolaos Theodoropoulos, 2010. "Ethnic minority immigrants and their children in Britain," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 209-233, April.
    11. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
    12. Uwe Jirjahn & Gesine Stephan, 2004. "Gender, piece rates and wages: evidence from matched employer--employee data," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 28(5), pages 683-704, September.
    13. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, vol. 93(1), pages 216-240, March.
    14. Solon, Gary, 1988. "Self-selection bias in longitudinal estimation of wage gaps," Economics Letters, Elsevier, vol. 28(3), pages 285-290.
    15. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
    16. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 447-463, July.
    17. Blackaby, D. H. & Clark, K. & Leslie, D. G. & Murphy, P. D., 1994. "Black-white male earnings and employment prospects in the 1970s and 1980s evidence for Britain," Economics Letters, Elsevier, vol. 46(3), pages 273-279, November.
    18. Bell, Brian D, 1997. "The Performance of Immigrants in the United Kingdom: Evidence from the GHS," Economic Journal, Royal Economic Society, vol. 107(441), pages 333-344, March.
    19. Colin P. Green & John S. Heywood, 2011. "Profit Sharing, Separation and Training," British Journal of Industrial Relations, London School of Economics, vol. 49(4), pages 623-642, December.
    20. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
    21. Stewart, Mark B., 2011. "The Changing Picture of Earnings Inequality in Britain and the Role of Regional and Sectoral Differences," National Institute Economic Review, National Institute of Economic and Social Research, vol. 218, pages 20-32, October.
    22. Colin Green & John S. Heywood, 2008. "Does Performance Pay Increase Job Satisfaction?," Economica, London School of Economics and Political Science, vol. 75(300), pages 710-728, November.
    23. Blackaby, D. H. & Leslie, D. G. & Murphy, P. D. & O'Leary, N. C., 1998. "The ethnic wage gap and employment differentials in the 1990s: Evidence for Britain," Economics Letters, Elsevier, vol. 58(1), pages 97-103, January.
    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


    Cited by:

    1. Benjamin Artz & Colin P. Green & John S. Heywood, 2021. "Does performance pay increase alcohol and drug use?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 969-1002, July.
    2. Simonetta Longhi, 2020. "Racial wage differentials in developed countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 365-365, October.
    3. Janice Fanning Madden & Alexander Vekker, 2017. "Output-Based Performance Pay, Performance-Support Bias, and the Racial Pay Gap within a Large Retail Stock Brokerage," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(4), pages 662-687, October.
    4. Melanie Jones & Ezgi Kaya, 2024. "Performance‐related pay and the UK gender pay gap," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(4), pages 512-529, October.
    5. Douglas Amuli Ibale, 2020. "Earning structure and heterogeneity of the labor market: Evidence from DR Congo," LIDAM Discussion Papers IRES 2020037, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Jones, Melanie, 2024. "The disability pay gap in the UK: What is the role of the public sector?," Labour Economics, Elsevier, vol. 91(C).
    7. Geraldine Healy & M. Mostak Ahamed, 2019. "Gender Pay Gap, Voluntary Interventions and Recession: The Case of the British Financial Services Sector," British Journal of Industrial Relations, London School of Economics, vol. 57(2), pages 302-327, June.
    8. Forth, John & Jones, Melanie K., 2025. "The Disability Pay Gap Within and Across Firms," IZA Discussion Papers 17679, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2012. "Performance Pay and Ethnic Wage Differences in Britain," University of Cyprus Working Papers in Economics 06-2012, University of Cyprus Department of Economics.
    2. John S. Heywood & Daniel Parent, 2012. "Performance Pay and the White-Black Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 249-290.
    3. Colin P. Green & John S. Heywood, 2016. "Don't Forget the Gravy! Are Bonuses Just Added on Top of Salaries?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(3), pages 490-513, July.
    4. John S. Heywood & Daniel Parent, 2017. "Performance Pay, the Gender Gap, and Specialization within Marriage," Journal of Labor Research, Springer, vol. 38(4), pages 387-427, December.
    5. Melanie Jones & Ezgi Kaya, 2024. "Performance‐related pay and the UK gender pay gap," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(4), pages 512-529, October.
    6. Colin Green & John Heywood, 2012. "Don't Forget the Gravy! Are Bonuses and Time Rates Complements?," Working Papers 13424023, Lancaster University Management School, Economics Department.
    7. Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2022. "Performance pay and alcohol use in Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 353-383, October.
    8. Frijters, Paul & Shields, Michael A. & Theodoropoulos, Nikolaos & Wheatley Price, Stephen, 2003. "Testing for Employee Discrimination Using Matched Employer-Employee Data: Theory and Evidence," IZA Discussion Papers 807, Institute of Labor Economics (IZA).
    9. Paul Frijters, 2003. "Testing for Employee Discrimination using Matched Employer-Employee Data: Theory and Evidence," Paul Frijters Discussion Papers 2003-1, School of Economics and Finance, Queensland University of Technology.
    10. Yann Algan & Christian Dustmann & Albrecht Glitz & Alan Manning, 2010. "The Economic Situation of First and Second-Generation Immigrants in France, Germany and the United Kingdom," Economic Journal, Royal Economic Society, vol. 120(542), pages 4-30, February.
    11. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2022. "Worker stress and performance pay: German survey evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 276-291.
    12. Van Phan & Carl Singleton & Alex Bryson & John Forth & Felix Ritchie & Lucy Stokes & Damian Whittard, 2022. "Accounting for firms in ethnicity wage gaps throughout the earnings distribution," DoQSS Working Papers 22-03, Quantitative Social Science - UCL Social Research Institute, University College London.
    13. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2023. "Does Performance Pay Increase the Risk of Marital Instability?," GLO Discussion Paper Series 1305, Global Labor Organization (GLO).
    14. Baktash, Mehrzad B., 2023. "Overeducation, Performance Pay and Wages: Evidence from Germany," GLO Discussion Paper Series 1327, Global Labor Organization (GLO).
    15. McGuinness, Seamus & Byrne, Delma, 2014. "Examining the Relationships between Labour Market Mismatches, Earnings and Job Satisfaction among Immigrant Graduates in Europe," IZA Discussion Papers 8440, Institute of Labor Economics (IZA).
    16. Paul Frijters & Michael A. Shields & Stephen Wheatley Price & Nikolaos Theodoropoulos, 2006. "Testing for Employee Discrimination in Britain using Matched Employer-Employee Data," University of Cyprus Working Papers in Economics 8-2006, University of Cyprus Department of Economics.
    17. Andrej Cupák & Pavel Ciaian & d'Artis Kancs, 2021. "Comparing the immigrant-native pay gap: A novel evidence from home and host countries," EERI Research Paper Series EERI RP 2021/05, Economics and Econometrics Research Institute (EERI), Brussels.
    18. K. Sommerfeld, 2013. "Higher and higher? Performance pay and wage inequality in Germany," Applied Economics, Taylor & Francis Journals, vol. 45(30), pages 4236-4247, October.
    19. Sylvia Fuller & Lynn Prince Cooke, 2018. "Workplace Variation in Fatherhood Wage Premiums: Do Formalization and Performance Pay Matter?," Work, Employment & Society, British Sociological Association, vol. 32(4), pages 768-788, August.
    20. Yann Algan & Christian Dustmann & Albrecht Glitz & Alan Manning, 2009. "The Economic Situation of First- and Second-Generation Immigrants in France, Germany, and the UK," RF Berlin - CReAM Discussion Paper Series 0922, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:66:y:2014:i:3:p:798-823.. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.