Employee Involvment and Pay at U.S. and Canadian Auto Suppliers

Using both survey data and field research, we investigate the effects of employee involvement practices on outcomes for blue-collar workers in the auto supply industry. Using a variety of measures, we find consistent evidence that these practices raise wages by 3-5%. The causal mechanism linking involvement and wages appears most consistent with efficiency wage theories, and least consistent with compensating differences. With respect to employment stability, we find that employee involvement has a knife-edge character. Plants with intensive programs have larger employment gains, but are also slightly more likely to go out of business. These results are consistent with employee involvement raising quality and productivity, but also increasing fixed costs for liquidity-constrained firms.