Performance Pay, Union Bargaining and within-firm Wage Inequality

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Barth, Erling, Bernt Bratsberg, Torbjørn Hægeland og Oddbjørn Raaum




Oxford Bulletin of Economics & Statistics

74(3), 327-362

Sammendrag (engelsk)

Theory predicts that performance pay boosts wage dispersion. Workers retain a share of individual productivity shocks and high-efficiency workers receive compensation for greater effort. Collective bargaining can mitigate the effect of performance pay on wage inequality by easing monitoring of common effort standards and group-based pay schemes. Analyses of longitudinal employer-employee data show that the introduction of performance-related pay raises wage inequality in non-union firms, but not in firms with high union density. Although performance-related pay appears to be on the rise, the overall impact on wage dispersion is likely to be small, particularly in European countries with influential unions.

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Oppdragsgiver: ISF/Norges forskningsråd
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Frisch prosjekt: 1159 - Changing work