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Performance Pay and Ethnic Wage Differences in Britain

Author

Listed:
  • Colin P. Green
  • John S. Heywood
  • Nikolaos Theodoropoulos

Abstract

In the first study using British data, we show that the average wage advantage of holding a performance pay job is greater for minorities than that for Whites. This generates a smaller ethnic wage gap among performance pay jobs than among time rate jobs. Yet, this pattern is driven by those receiving bonuses not those receiving performance related pay and it is evident only for Asians and for those in managerial jobs. Moreover, it is partially driven by sorting in which the more able take bonus jobs. Nonetheless, the basic results persist with diminished magnitude in fixed effect estimates. These findings differ dramatically from those for United States in which bonuses appear to increase racial differentials especially at the top of the earnings distribution.

Suggested Citation

  • Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2012. "Performance Pay and Ethnic Wage Differences in Britain," University of Cyprus Working Papers in Economics 06-2012, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:06-2012
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    File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/06-12.pdf
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    References listed on IDEAS

    as
    1. Kevin Lang, 2007. "Introduction to Poverty and Discrimination," Introductory Chapters,in: Poverty and Discrimination Princeton University Press.
    2. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 1-49.
    3. Colin Green & John Heywood, 2012. "Don't Forget the Gravy! Are Bonuses and Time Rates Complements?," Working Papers 13424023, Lancaster University Management School, Economics Department.
    4. John S. Heywood & Daniel Parent, 2012. "Performance Pay and the White-Black Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 249-290.
    5. John S. Heywood & Patrick L. O’Halloran, 2005. "Racial Earnings Differentials and Performance Pay," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    6. Blackaby, D.H. & Leslie, D.G. & Murphy, P.D. & O'Leary, N.C., 2005. "Born in Britain: How are native ethnic minorities faring in the British labour market?," Economics Letters, Elsevier, vol. 88(3), pages 370-375, September.
    7. Christian Dustmann & Nikolaos Theodoropoulos, 2010. "Ethnic minority immigrants and their children in Britain," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 209-233, April.
    8. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, December.
    9. Méon, Pierre-Guillaume & Szafarz, Ariane, 2011. "The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions," Labour Economics, Elsevier, vol. 18(4), pages 487-497, August.
    10. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, vol. 93(1), pages 216-240, March.
    11. Blackaby, D. H. & Clark, K. & Leslie, D. G. & Murphy, P. D., 1994. "Black-white male earnings and employment prospects in the 1970s and 1980s evidence for Britain," Economics Letters, Elsevier, vol. 46(3), pages 273-279, November.
    12. repec:eme:rleczz:s0147-9121(2009)0000029014 is not listed on IDEAS
    13. Christian Dustmann & Tommaso Frattini & Nikolaos Theodoropoulos, 2010. "Ethnicity and Second Generation Immigrants in Britain," CReAM Discussion Paper Series 1004, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    14. Bloom, Nicholas & Van Reenen, John, 2011. "Human Resource Management and Productivity," Handbook of Labor Economics, Elsevier.
    15. Tony Fang & John S. Heywood, 2010. "Immigration, Ethnic Wage Differentials and Output Pay in Canada," British Journal of Industrial Relations, London School of Economics, vol. 48(1), pages 109-130, March.
    16. Solon, Gary, 1988. "Self-selection bias in longitudinal estimation of wage gaps," Economics Letters, Elsevier, vol. 28(3), pages 285-290.
    17. Ken Clark & Stephen Drinkwater, 2009. "Dynamics and diversity: ethnic employment differences in England and Wales, 1991–2001," Research in Labor Economics,in: Ethnicity and Labor Market Outcomes, volume 29, pages 299-333 Emerald Publishing Ltd.
    18. Blackaby, D. H. & Leslie, D. G. & Murphy, P. D. & O'Leary, N. C., 1998. "The ethnic wage gap and employment differentials in the 1990s: Evidence for Britain," Economics Letters, Elsevier, vol. 58(1), pages 97-103, January.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A benefit of performance pay
      by chris dillow in Stumbling and Mumbling on 2012-05-29 18:43:17

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    Cited by:

    1. Chiang, Hui-Yu & Ohtake, Fumio, 2014. "Performance-pay and the gender wage gap in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 71-88.

    More about this item

    Keywords

    Performance Pay; Ethnic Earnings Differentials;

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