IDEAS home Printed from https://ideas.repec.org/p/osf/socarx/ntj3f.html
   My bibliography  Save this paper

Productivity, Profits, and Pay: A Field Experiment Analyzing the Impacts of Compensation Systems in an Apparel Factory

Author

Listed:
  • Lollo, Niklas
  • O'Rourke, Dara

Abstract

Factory worker pay in global value chains remains a contentious issue. In this paper, we evaluate a two-year field experiment in an apparel factory to analyze altered compensation systems designed to increase worker pay while supporting factory goals around productivity and profitability. Using a quasi-experimental design, with unique data on wages, hours, productivity, quality, and worker engagement, we estimate the impact of three altered compensation systems on pay, productivity, and factory profits. The compensation systems can be described as: 1) an improved productivity-based scheme, 2) a scheme that brings quality and waste reduction into the calculation; and 3) a “target wage” scheme. Overall, the treatments raised wages by 4.2-9.7% and increased productivity by 8-10% points. Management reported significant financial benefits from the experiment, including increased profits for five of six lines, and avoided costs and productivity losses due to decreased turnover. The factory workers, through focus-group interviews before, during, and after the intervention, reported improved relations with team members and managers. This study demonstrates altered factory compensation can support better factory performance and a better paid workforce, indicating a path towards advanced supply chains with improved wages.

Suggested Citation

  • Lollo, Niklas & O'Rourke, Dara, 2019. "Productivity, Profits, and Pay: A Field Experiment Analyzing the Impacts of Compensation Systems in an Apparel Factory," SocArXiv ntj3f, Center for Open Science.
    • Handle: RePEc:osf:socarx:ntj3f
    DOI: 10.31219/osf.io/ntj3f
    as

    Download full text from publisher

    File URL: https://osf.io/download/5c82f5541d73810019bdfced/
    Download Restriction: no
    File URL: https://libkey.io/10.31219/osf.io/ntj3f?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:osf:socarx:ntj3f. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: OSF (email available below). General contact details of provider: https://arabixiv.org .

    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.