Some are Punished and Some are Rewarded: A Study of the Impact of Performance Pay on Job Satisfaction

W.D. McCausland, Konstantinos Pouliakas () and Ioannis Theodossiou
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W.D. McCausland: University of Aberdeen

Labor and Demography from EconWPA

Abstract: Using an econometric procedure that corrects for both self-selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance- related pay (PRP) compared to those on alternative compensation plans. Using data from four waves of the British Household Panel Survey (BHPS), it is found that PRP exerts a positive effect on the mean job satisfaction of (very) high-paid workers only. A potential explanation for this pattern could be that for lower-paid employees PRP is perceived to be controlling, whereas higher-paid workers derive a utility benefit from what they regard as supportive reward schemes. Using PRP as an incentive device in the UK could therefore be counterproductive in the long run for certain low-paid occupations.

Keywords: Performance-related pay; job satisfaction; self-selection (search for similar items in EconPapers)
JEL-codes: J28 J33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cbe and nep-lab
Date: 2005-05-24
Note: Type of Document - pdf; pages: 41
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Working Paper: Some are Punished and Some are Rewarded: A Study of the Impact of Performance Pay on Job Satisfaction (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpla:0505019

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