Performance Pay and Wage Inequality

Thomas Lemieux (), W. Bentley Macleod and Daniel Parent ()

No 2850, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We document that an increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using bonuses, commissions, or piece-rates. We find that compensation in performance-pay jobs is more closely tied to both observed (by the econometrician) and unobserved productive characteristics of workers. Moreover, the growing incidence of performance-pay can explain 24 percent of the growth in the variance of male wages between the late 1970s and the early 1990s, and accounts for nearly all of the top-end growth in wage dispersion (above the 80th percentile).

Keywords: performance pay; compensation; bonus pay; incentive pay; wage inequality (search for similar items in EconPapers)
JEL-codes: J31 J33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-lab
Date: 2007-06
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Related works:
Working Paper: Performance Pay and Wage Inequality (2007)
Working Paper: PERFORMANCE PAY AND WAGE INEQUALITY (2006)
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