Performance Pay and Ethnic Wage Differences in Britain
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.
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