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Piece Work Pay and Hourly Pay over the Cycle

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  • Hart, Robert A.

    (University of Stirling)

Abstract

This paper investigates the relative cyclical behavior of the pay of piece workers and hourly paid workers. It uses a unique data set of blue-collar workers in British engineering between 1926 and 1966. The statistics are obtained from the payrolls of firms belonging to the Engineering Employers Federation (EEF). Roughly, the EEF accounted for one-third of the total engineering workforce. The data consist of cell averages delineated by 15 occupations in 29 engineering districts. Via a firm-union bargaining modelling structure, the question is examined as to likely earnings responses to price shocks under the two payment systems. The empirical work entails testing for cyclical differences in the two payments methods Insights are gained from distinguishing between the relatively tight post-war and slack pre-war labor markets.

Suggested Citation

  • Hart, Robert A., 2006. "Piece Work Pay and Hourly Pay over the Cycle," IZA Discussion Papers 2210, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2210
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    References listed on IDEAS

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    1. Robert A. Hart, 2005. "General human capital and employment adjustment in the Great Depression: apprentices and journeymen in UK engineering," Oxford Economic Papers, Oxford University Press, vol. 57(1), pages 169-189, January.
    2. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 1-25.
    3. Ben S. Bernanke & James Powell, 1986. "The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Prewar and Postwar Eras," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 583-638, National Bureau of Economic Research, Inc.
    4. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
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    6. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October.
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    8. Fama, Eugene F, 1991. "Time, Salary, and Incentive Payoffs in Labor Contracts," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 25-44, January.
    9. Robert A. Hart, 2006. "Worker–Job Matches, Job Mobility and Real Wage Cyclicality," Economica, London School of Economics and Political Science, vol. 73(290), pages 287-298, May.
    10. Eric Wigham, 1973. "The Power to Manage," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-01264-0, October.
    11. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
    12. Paul J. Devereux, 2001. "The Cyclicality of Real Wages within Employer-Employee Matches," ILR Review, Cornell University, ILR School, vol. 54(4), pages 835-850, July.
    13. Paul J. Devereux & Robert A. Hart, 2006. "Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers," ILR Review, Cornell University, ILR School, vol. 60(1), pages 105-119, October.
    14. Bernanke, Ben S, 1986. "Employment, Hours, and Earnings in the Depression: An Analysis of EightManufacturing Industries," American Economic Review, American Economic Association, vol. 76(1), pages 82-109, March.
    15. Hart,Robert A. & Moutos,Thomas, 2008. "Human Capital, Employment and Bargaining," Cambridge Books, Cambridge University Press, number 9780521061032, January.
    16. Donggyun Shin & Gary Solon, 2007. "New Evidence On Real Wage Cyclicality Within Employer–Employee Matches," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 648-660, November.
    17. Lutz Bellmann & Uwe Blien, 2001. "Wage Curve Analyses of Establishment Data from Western Germany," ILR Review, Cornell University, ILR School, vol. 54(4), pages 851-863, July.
    18. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-689, August.
    19. Charles Brown, 1990. "Firms' Choice of Method of Pay," ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-1-182-, April.
    20. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-445, March.
    21. 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 363-376, August.
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    Cited by:

    1. Hart, Robert A. & Roberts, J. Elizabeth, 2013. "Industrial Composition, Methods of Compensation and Real Earnings in the Great Depression," National Institute Economic Review, National Institute of Economic and Social Research, vol. 226, pages 17-29, November.
    2. Anger, Silke, 2011. "The cyclicality of effective wages within employer–employee matches in a rigid labor market," Labour Economics, Elsevier, vol. 18(6), pages 786-797.
    3. Grace Weishi Gu & Eswar Prasad & Thomas Moehrle, 2020. "New Evidence on Cyclical Variation in Average Labor Costs in the United States," The Review of Economics and Statistics, MIT Press, vol. 102(5), pages 966-979, December.
    4. Silke Anger, 2007. "The Cyclicality of Effective Wages within Employer-Employee Matches: Evidence from German Panel Data," Discussion Papers of DIW Berlin 719, DIW Berlin, German Institute for Economic Research.
    5. Grace Weishi Gu & Eswar Prasad, 2018. "New Evidence on Cyclical Variation in Labor Costs in the U.S," NBER Working Papers 24266, National Bureau of Economic Research, Inc.
    6. Hart, Robert A. & Roberts, J. Elizabeth, 2010. "Real Wages, Working Time, and the Great Depression: What Does Micro Evidence Tell Us?," IZA Discussion Papers 4977, Institute of Labor Economics (IZA).
    7. Robert A. Hart & J. Elizabeth Roberts, 2013. "Real wage cyclicality and the Great Depression: evidence from British engineering and metal working firms," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 197-218, April.
    8. Cantarella, Michele & Strozzi, Chiara, 2022. "Piecework and Job Search in the Platform Economy," IZA Discussion Papers 15775, Institute of Labor Economics (IZA).
    9. Robert A. Hart, 2016. "The rise and fall of piecework," IZA World of Labor, Institute of Labor Economics (IZA), pages 254-254, April.
    10. Beatriz Muriel & Horacio Vera, 2015. "The Effects of Economic Growth on Earnings in Bolivia," Development Research Working Paper Series 08/2015, Institute for Advanced Development Studies.

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    More about this item

    Keywords

    business cycle; hourly pay; piece work pay;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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