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Is Seniority-Based Pay Used as a Motivation Device? Evidence from Plant Level Data

  • Alberto Bayo-Moriones
  • Jose E. Galdon-Sanchez
  • Maia Güell

In this paper we use data from industrial plants to investigate if seniority-based pay is used asa motivational device for production workers. Alternatively, seniority-based pay could simplybe a wage setting rule not necessarily related to the provision of incentives. Unlike previouspapers, we use a direct measure of seniority-based pay as well as measures of monitoringdevices and piece-rates. We find that firms that offer seniority-based pay are less likely tooffer explicit incentives. They are also less likely to invest in monitoring devices. We alsofind that firms that offer seniority-based pay are more likely to engage in other humanresource management policies that result in long employment relationships. Overall theseresults suggest that seniority-based pay is indeed used as a motivation device.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0646.

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Date of creation: Aug 2004
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Handle: RePEc:cep:cepdps:dp0646
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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