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

  • Bayo-Moriones, Alberto
  • Galdón Sánchez, José Enrique
  • Güell, Maia

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

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4606.

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Date of creation: Sep 2004
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Handle: RePEc:cpr:ceprdp:4606
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