Beruflich Dokumente
Kultur Dokumente
Access to this document was granted through an Emerald subscription provided by All users group
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
Performance pay
Performance pay and employee and employee
turnover turnover
Patrick L. OHalloran
Department of Economics, Finance and Real Estate, Leon Hess Business School, 653
Monmouth University, West Long Branch, New Jersey, USA
Received 19 March 2011
Accepted 24 October 2011
Abstract
Purpose The purpose of this paper is to explore how various performance related pay (PRP)
schemes influence employee turnover. It also tests whether profit sharing has a differential impact on
turnover in comparison to other forms of PRP.
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
I. Introduction
Despite vast literatures on both employee turnover and the many impacts of
performance related pay (PRP), very few studies explicitly investigate how employee
turnover is affected by other PRP schemes besides profit sharing. Prior research
suggests that workers receiving individual PRP and profit sharing are more satisfied
with their jobs (Heywood and Wei, 2006; Green and Heywood, 2008; Kruse et al., 2010)
than those receiving pay based on traditional time-rates, even after accounting for the
higher pay levels associated with PRP. Moreover, it seems clear that there exists
positive selection on PRP whereby workers who are relatively less risk averse, more
Journal of Economic Studies
The author would like to thank Dr John S. Heywood for his continued guidance and support Vol. 39 No. 6, 2012
as well as an anonymous referee for constructive comments. The author would also like to thank pp. 653-674
q Emerald Group Publishing Limited
his beloved wife Susanne for her continual encouragement. All remaining errors are the authors 0144-3585
own. DOI 10.1108/01443581211274601
JES confident and more able receive a return or rent on these characteristics in PRP jobs that
39,6 they cannot obtain in a standard time-rate job (Curme and Stefanec, 2007).
Consequently, if PRP workers are more satisfied with their jobs, they may
experience lower turnover than traditional time-rate workers (Clark et al., 1998)
making a result thought limited to workers on profit sharing apply more broadly to all
workers receiving PRP. Furthermore, prior studies find mixed support for Weitzmans
654 (1985) hypothesis that stock options and profit sharing enhance job security by
allowing marginal labor costs to vary with profitability (Kruse, 1993; Kruse et al., 2010).
Also, comparing turnover propensities between PRP and time-rate workers provides
further evidence as to which of the two broad models of PRP may be most applicable;
the classic agency theory or the sorting theory of Lazear (1981, 1983). According to
classic agency theory, PRP workers are fully compensated for the inherent higher risks
associated with PRP, leaving them indifferent between PRP jobs and standard time-rate
jobs, implying no difference in turnover. Alternatively, according to the sorting theory,
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
PRP tends to attract the less risk averse and more able, who receive a rent they would
not obtain in a time-rate position, implying lower turnover among PRP workers.
Research presented herein estimates the impact various forms of PRP has on US
employee turnover including both quits and layoffs (those who report job termination
due to firing, layoff, or plant closing), by analyzing data from six waves of the National
Longitudinal Survey of Youth 1979 (NLSY79). Although there is an abundance of
research on how profit sharing affects job turnover, very little research focuses on how
other PRP schemes such as piece rates or bonuses influence job turnover. Specifically,
the empirical analysis focuses on whether workers receiving PRP, both aggregated and
disaggregated by type, experience differing rates of turnover than those paid
time-rates. Critically, few studies explicitly explore how other types of PRP besides
profit sharing influence job turnover.
There are several different PRP schemes. PRP can be based on individual
performance as is typical with piece rates and commissions or based on collective
performance as is typical with profit sharing and stock options. Furthermore, PRP can be
based on subjective measures of effort such as how hard one appears to be working, or
based on objective measures of effort such as the number and quality of units produced.
Given the varied incentives provided from different PRP schemes, one would expect
each to affect employee turnover differently.
Empirical analysis of the nationally representative sample reveals that those who
receive any form of PRP experience lower rates of job turnover than those who do not
receive any PRP, even after controlling for many commonly known determinants of
turnover. Most importantly, when PRP is disaggregated by type, significant differences
emerge. Workers who receive pay in the form of stock options and profit sharing
experience significantly lower rates of turnover than those who do not, supporting the
Weitzman hypothesis. Conversely, there are no significant differences in turnover between
non-PRP workers and those receiving piece rates, commissions, and tips. Also, there is
weak evidence that those who receive bonuses experience fewer layoffs. Consequently, the
lower turnover rates observed using the aggregated PRP measure are mainly driven by
stock options and profit sharing, suggesting that those forms of PRP may be unique.
Splitting turnover into quits and layoffs reveals that workers participating in
profit-sharing plans are significantly less likely to experience a layoff or quit while
workers receiving stock options are significantly less likely to quit. Findings also
corroborate those of Azfar and Danninger (2001) and Green and Heywood (2010), who Performance pay
theorize that profit sharing allows for increased expected returns on firm-specific human and employee
capital investments such as on-the-job training due to higher expected tenure. Although
PRP schemes are typically introduced to increase worker productivity, employers utilizing turnover
profit sharing or stock option schemes may experience lower labor force turnover.
The paper proceeds as follows: Section II will provide background on the relationship
between PRP, job satisfaction, and turnover; Section III will review the data and provide 655
rationales for covariate selection; Section IV will summarize the empirical results;
and Section V offers conclusions.
is associated with PRP jobs, as well as rewarding greater effort typically put forth in PRP
jobs. This model implies that, since workers are fully compensated for the greater risk
and effort PRP entails, workers retain the same level of utility that they would have had
in a standard time-rate position. Consequently, according to agency theory, job
satisfaction would be no different in a PRP job as opposed to a time-rate job. Hence, one
would expect similar rates of job turnover between PRP workers and time-rate workers.
Alternatively, Lazear (1981, 1983) argues that firms face a zero profit constraint and
workers sort to capture rents they would not be able to obtain in a standard time-rate
position. These rents arise because PRP is thought to attract those workers who are
less risk averse and more able, and who will be more satisfied in jobs where their
additional effort is commensurately rewarded. If workers cannot obtain similar rents in
a time-rate position, one would expect to observe lower rates of turnover in jobs
associated with PRP. Recent research by Cornelissen et al. (2011) make it clear that
while the Lazear theory of PRP implies rents, other models such as the classic agency
model do not. Accordingly, this paper provides further evidence as to which theory is
most appropriate in modeling workers reactions to PRP. If PRP is associated with
lower turnover, the Lazear sorting model would better depict how PRP influences
workers. If PRP is not associated with lower turnover, the classic agency theory of
worker response to PRP would appear a better depiction of reality.
A growing body of literature finds that PRP tends to increase overall job
satisfaction. Heywood and Wei (2006) find that both individual performance pay and
profit sharing are positively related to job satisfaction while Green and Heywood (2008)
find that PRP workers are more satisfied with their jobs, pay level, job security and
hours than non-PRP workers. These findings support the theory that PRP allows
workers to more freely optimize on various dimensions without crowding out intrinsic
motivation, thereby generating positive rents for workers unavailable in non-PRP jobs.
Furthermore, Brown and Sessions (2006) argue that workers prefer work environments
where their earnings equal their marginal revenue product, which they find improves
optimism concerning future employment relationships. Additionally, both Goddard
(2001) and Bauer (2004) find that PRP schemes are often part of a larger package of
human resource management practices that are known to improve job satisfaction.
Critically, prior evidence demonstrates that less satisfied workers typically experience
more job turnover than more satisfied workers (Freeman, 1978; Akerlof et al., 1988;
JES Clark et al., 1998; Garboua et al., 2007). Therefore, presuming more satisfied workers
39,6 are less likely to experience turnover, one would expect to observe a negative
relationship between PRP and job turnover.
It is also well known that introducing PRP schemes causes large amounts of
self-selection to occur, whereby workers preferring PRP schemes self-select into jobs that
offer PRP schemes. Sliwka and Grund (2006) find the higher inherent risk associated with
656 PRP schemes attract a disproportionate number of less risk-averse workers who are
more satisfied accepting greater pay variability in return for higher pay levels. Many
studies identify a positive correlation between PRP and earnings (Pencavel, 1972; Seiler,
1984; Brown, 1990; Ewing, 1996; Booth and Frank, 1999; Parent, 1999). Indeed, Weitzman
(1985) and Kruse (1993) argue that PRP schemes such as profit sharing and stock options
may result in a decreased probability of layoffs, since firms are able to decrease payments
when profitability is lower. Consequently, the increased job security associated with PRP
based on firm performance may result in greater job satisfaction, especially satisfaction
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
the incidence of on-the-job training which is known to reduce turnover (Royalty, 1996).
Others also identify a negative relation between various PRP schemes and turnover.
Chelius and Smith (1990) provide suggestive evidence that profit sharing reduces the
incidence of layoffs in the face of decreased product demand. Furthermore, Scoppa (2003)
theorizes that firms employ PRP when the costs associated with turnover are high and
fixed pay when the costs associated with turnover are low. Dale-Olsen (2004) finds
evidence in Norway of a negative association between turnover costs and the use of
alternative forms of remuneration such as fringe benefits. He finds that fringe benefits
have a stronger negative impact on turnover than what would be indicated by the fringe
benefits monetary value, supporting the idea that fringe benefits have an independent
influence on turnover. In sum, literature reveals a strong negative relationship between
aggregate measures of PRP and turnover, lower turnover among those receiving stock
options, profit sharing and bonuses, and higher turnover among those receiving
piece rates and commissions. The analysis below will attempt to add to this literature by
further exploring which PRP schemes most significantly influence turnover.
no information was collected about how much of their earnings were based on these
schemes. Earnings could be entirely based on PRP or only marginally affected by PRP.
Another problematic issue is what constitutes other forms of PRP. Fully 2.4 percent
of the sample employed in analysis report receiving other forms of PRP. Although it
is impossible to interpret what these other types of PRP entail, they will be included
when constructing the aggregated PRP variable and also included as a separate PRP
scheme in the disaggregated estimations. Given these restrictions, it is impossible
determine to what extent earnings are PRP based. The lack of more detailed PRP
information limits the ability to effectively assess the relation between job turnover
and PRP. This becomes even more problematic if some jobs entail combinations of PRP
schemes. Restrictions aside, one can arguably use the incidence of PRP to examine the
relationship between PRP and other labor market outcomes.
The survey also asks respondents why their job terminated[1]. The survey asks
respondents which of the reasons on this card best describes why you happened to
leave this job? Listed reasons include layoffs, plant closing, end of temporary/seasonal
job, firing, program ending, quitting for family reasons, quitting to find or take another
job, and quitting for other reasons. From these questions, the aggregate indicator of
turnover equals one if the respondent reported a quit or layoff for any reason, zero
otherwise. Analogously, indicator variables for quits and layoffs are created to
distinguish between reasons for turnover. Layoffs are equal to one if the respondent
reports a layoffs, plant closing, end of temporary/seasonal job, firing, or program ending.
Many other individual and firm level characteristics are available in the NLSY79
and are summarized by payment scheme in Table I. Since PRP is known to attract
more educated and able workers, measures of human capital and ability are included
as controls. Education is measured as the highest grade completed as of May 1 of each
survey year. Ability is proxied by each individuals percentile score on the Armed
Forces Qualification Test. As Table I displays, educational levels and ability are
slightly higher among PRP workers, except among those receiving piece rates and tips.
Given the close relationship between earnings, satisfaction and turnover, analysis
will include an earnings measure created by taking the logarithm of the individuals real
wage. The real wage is obtained by dividing the individuals nominal hourly rate of pay
by the respondents regions Consumer Price Index All Urban Consumers using
1982-1984 as the base period. Furthermore, because on-the-job training and turnover are
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Turnover 6.59% 10.51% 81.27 11.03% 7.82% 14.71% 5.28% 1.91% 5.13% 4.63%
Quit 4.46% 6.69% 38.90 5.13% 5.06% 10.87% 3.90% 1.67% 3.38% 3.37%
Layoff 2.12% 3.82% 40.71 5.90% 2.76% 3.84% 1.38% 0.24% 1.74% 1.26%
Like job very much 45.78% 44.81% 1.58 34.87% 52.53% 39.23% 50.45% 55.26% 45.54% 50.91%
Like job fairly well 46.31% 45.21% 2.05 52.56% 40.46% 50.32% 43.99% 40.19% 46.43% 43.01%
Dislike job somewhat 6.10% 7.11% 6.92 9.49% 5.86% 8.74% 4.22% 4.07% 6.02% 4.68%
Dislike job very much 1.82% 2.87% 19.81 3.08% 1.15% 1.71% 1.34% 0.48% 2.01% 1.41%
Tenure (in weeks) 255.31 236.79 24.36 233.50 199.90 137.70 262.00 311.64 274.46 264.64
AFQT 50.42 46.53 79.43 36.44 55.22 40.36 56.18 63.01 50.29 54.90
Education 13.44 13.28 20.02 12.01 13.79 12.43 13.97 14.69 13.46 13.88
Real Wage $9.64 $8.00 294.71 $8.31 $10.73 $5.88 $11.12 $15.51 $9.75 $11.48
Log Real Wage $2.09 $1.94 350.97 $1.90 $2.16 $1.58 $2.23 $2.56 $2.13 $2.25
On-the-Job Training 22.58% 18.38% 46.03 14.36% 26.21% 12.37% 27.25% 27.99% 22.91% 27.92%
Female 48.54% 51.52% 15.03 44.62% 37.24% 65.88% 41.43% 33.49% 50.12% 40.74%
Nonwhite 18.23% 19.78% 6.55 21.28% 11.15% 20.26% 16.94% 12.20% 18.68% 16.15%
Black 11.61% 12.87% 6.19 13.08% 5.86% 10.45% 10.15% 6.94% 12.34% 9.46%
Hispanic 6.63% 6.92% 0.56 8.21% 5.29% 9.81% 6.78% 5.26% 6.34% 6.69%
Age 32.29 32.66 22.25 32.06 31.99 31.42 32.4212 34.60 32.17 32.44
Unmarried w/o Children 28.76% 28.91% 0.04 27.69% 32.30% 42.22% 30.06% 28.95% 26.52% 28.87%
Unmarried w/Children , 6 years 4.20% 5.12% 8.06 5.64% 3.56% 6.61% 3.05% 2.63% 4.40% 3.67%
Unmarried w/Children . 6 years 6.93% 7.74% 4.04 9.74% 4.02% 9.59% 5.08% 4.55% 7.01% 4.88%
Married w/o Children 15.19% 13.48% 10.13 10.00% 17.82% 10.66% 16.37% 11.24% 15.68% 15.59%
Married w/Children , 6 years 27.24% 25.67% 5.36 23.59% 27.59% 15.14% 29.65% 33.25% 28.48% 30.38%
Married w/Children . 6 years 17.68% 19.07% 5.47 23.33% 14.71% 15.78% 15.80% 19.38% 17.91% 16.60%
(continued)
and employee
Descriptive statistics
turnover
Performance pay
659
Table I.
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
JES
39,6
660
Table I.
Piece Stock Profit Multiple PRP
Variable PRP Non-PRP F-ratio rates Commissions Tips Bonuses opts sharing schemes
Occupation
Professional 16.87% 23.80% 124.19 3.59% 6.67% 1.71% 19.90% 22.01% 17.79% 15.64%
Managerial 20.33% 11.20% 227.24 3.85% 24.14% 8.32% 30.50% 40.43% 20.38% 28.77%
Sales 7.44% 2.14% 281.71 1.79% 35.06% 0.64% 8.16% 6.22% 6.58% 12.17%
Clerical 17.34% 18.90% 6.82 9.49% 7.24% 2.99% 13.24% 9.09% 21.15% 11.87%
Craft 10.20% 12.69% 25.52 21.54% 8.97% 1.49% 8.37% 6.70% 10.19% 8.10%
Operative 10.07% 8.11% 19.84 40.51% 2.18% 0.85% 6.54% 7.42% 10.86% 8.45%
Transport Operative 3.52% 3.77% 0.73 5.90% 5.29% 4.90% 3.13% 2.39% 3.24% 3.67%
Laborer 3.57% 5.47% 34.34 8.97% 1.15% 2.99% 2.92% 1.20% 3.46% 2.46%
Farm 0.19% 0.09% 2.66 0.26% 0.00% 0.00% 0.28% 0.48% 0.18% 0.25%
Farm Laborer 0.39% 0.72% 8.31 1.03% 0.00% 0.21% 0.77% 0.00% 0.18% 0.30%
Service 9.93% 12.75% 32.19 3.08% 8.85% 75.91% 5.93% 3.83% 5.79% 8.00%
Private Household 0.01% 0.31% 20.98 0.00% 0.00% 0.00% 0.04% 0.00% 0.00% 0.00%
Industry
Agriculture 1.57% 2.08% 6.02 2.82% 0.69% 0.64% 2.27% 0.96% 1.34% 1.56%
Mining 0.58% 0.89% 5.16 0.00% 0.00% 0.21% 0.65% 0.24% 0.69% 0.40%
Construction 4.24% 8.54% 126.55 10.77% 3.56% 0.64% 5.24% 1.67% 3.46% 3.62%
Manufacturing 25.48% 15.87% 246.18 45.13% 12.07% 0.85% 21.28% 30.38% 29.78% 23.49%
Transportation 7.98% 6.41% 15.87 6.92% 7.59% 2.77% 8.08% 12.68% 8.71% 9.26%
Wholesale 23.01% 13.80% 247.37 14.62% 32.53% 63.97% 21.36% 21.53% 21.37% 25.91%
Finance 10.29% 4.38% 229.78 2.56% 16.90% 1.28% 11.37% 12.44% 10.78% 12.07%
Business Services 7.76% 6.38% 12.38 8.72% 12.30% 2.77% 9.99% 11.48% 6.87% 9.41%
Personal Services 3.20% 2.53% 7.02 1.54% 9.08% 22.39% 2.36% 1.44% 1.56% 4.02%
Entertainment 1.09% 1.36% 2.47 1.28% 1.72% 4.05% 1.14% 0.48% 0.75% 1.11%
Professional Services 12.52% 29.35% 726.59 3.08% 3.10% 0.43% 13.48% 5.98% 13.11% 8.20%
Public Administration 1.74% 8.17% 351.94 2.56% 0.11% 0.00% 2.11% 0.00% 1.05% 0.45%
Hours per Week 42.69 40.76 178.05 42.78 44.19 36.88 44.76 46.53 42.71 44.64
Union 9.12% 18.05% 281.63 19.49% 1.95% 3.62% 6.17% 5.50% 9.68% 5.68%
Small Employer (less than ten
employees) 19.27% 26.38% 120.21 22.56% 39.89% 31.56% 22.75% 12.20% 14.20% 22.43%
(continued)
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
661
Table I.
JES strongly negatively correlated (Royalty, 1996), an indicator in the estimations denoting
39,6 whether the respondent received any form of on-the-job training since their last
interview is included.
Female workers often experience higher turnover than males for reasons such as
childbirth and rearing (Golden 1986, 1990). Within the sample, 16 percent of those who
report leaving an employer quit for pregnancy or family reasons. Hence it seems
662 essential to control for the influence gender and family status have on turnover.
Besides an indicator for gender, six other indicator variables are created to represent an
individuals current family situation. These six indicators include:
(1) unmarried without children;
(2) unmarried with children under six years of age;
(3) unmarried with children six years of age or older;
(4) married without children;
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Furthermore, since larger establishments are more likely to make use of PRP schemes
(Brown, 1990) and have lower turnover (Evan and MacPhearson, 1996), four firm size
indicators are included. A firm is categorized as small if it employs less than
ten workers, medium if it employs between ten and 49 employees, large if it employs
between 50 and 200 employees, and very large if it employs more than 200 workers[2].
Respondents are also asked:
How (do/did) you feel about (the job you have now/your most recent job)? (Do/Did) you like it
very much, like it fairly well, dislike it somewhat, or dislike it very much?
Since job satisfaction is known to influence turnover decisions, four different indicators
to control for global job satisfaction are created from the four possible responses above.
Within the sample, 7 percent of those who report liking their job very much experience
turnover while those who report disliking their job very much have a turnover rate of
28 percent. Also, quits are more numerous than layoffs among workers who report
disliking their job very much.
Firms with internal labor markets typically experience lower turnover. This is
because an alternative external wage offer is typically lower than the internal wage offer
since the worker has accumulated firm specific knowledge that would not affect
pay levels elsewhere. Also, fringe benefits such as insurance or pensions typically lower
turnover. Consequently, to proxy for the presence of an internal labor market, I create an
indicator that equals one if a position change within an employer was a promotion, zero
otherwise. The fringe benefit indicator takes a value equal to one if the individual
receives either employer provided insurance (medical, dental, and life), maternity leave,
firm sponsored training and education, or employer-provided child care, and zero if
they receive none of these benefits.
Also, the nature of production critically determines whether various PRP schemes are
practicable. Much of the prior literature points to the fact that PRP jobs are not available
in every occupation or industry. Elliott and Murphy (1986) observed that workers may not
have the option to choose whether to obtain a PRP job. For example, they find that manual
workers are much more likely to be paid based on some performance measure in
comparison to non-manual workers. Similarly, Parent (1999) observes that PRP in the Performance pay
form of piece rates are concentrated in particular occupations such as sales and operative and employee
occupations, while bonuses tend to be more evenly spread across occupations. This is due
to the nature of the job and the difficulty involved in structuring the PRP scheme in turnover
situations where effort or output are extremely difficult or impossible to measure.
Consequently, to proxy for the nature of production, I include occupational/industrial
indicators at the one-digit level. Estimations also include an indicator for union 663
affiliation, as well as a count variable for the unemployment rate for the workers current
residence[3]. Additionally, since it is well known that older, more experienced workers
are much less likely to experience job turnover, we include a measure of the respondents
age. Lastly, estimations also include the respondents tenure in weeks with a particular
employer, average hours per week worked, urban status, number of jobs held, and
indicators for each year of the panel.
Table I displays summary statistics combining all six years of data in which PRP
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Transport operativea 2 0.006 (0.52) 20.007 (0.70) 20.007 (0.65) 2 0.005 (0.52)
Farm laborera 0.019 (0.65) 0.018 (0.64) 0.001 (0.05) 0.006 (0.23)
Private householda 2 0.012 (0.35) 20.015 (0.51) 20.027 (1.05) 2 0.023 (0.92)
Aga 2 0.022 (1.45) 20.021 (1.58) 20.020 (1.51) 2 0.019 (1.50)
Mininga 2 0.021 (1.04) 0.002 (0.11) 0.017 (0.78) 0.017 (0.78)
Constructiona 2 0.007 (0.83) 20.013 (1.58) 20.003 (0.30) 2 0.003 (0.31)
Mfga 2 0.023 (3.55) * * 20.006 (0.97) 0.001 (0.22) 0.001 (0.23)
Transportationa 2 0.032 (4.00) * * 20.018 (2.28) * 20.010 (1.21) 2 0.010 (1.20)
Financea 2 0.018 (2.19) * 20.012 (1.49) 20.002 (0.21) 2 0.002 (0.23)
Businessa 0.009 (1.05) 0.001 (0.08) 0.005 (0.62) 0.002 (0.25)
Personal serv.a 0.012 (1.02) 0.007 (0.68) 0.005 (0.54) 0.005 (0.55)
Entertainmenta 2 0.004 (0.27) 20.000 (0.01) 20.003 (0.18) 0.002 (0.12)
Prof. servicea 2 0.039 (6.27) * * 20.025 (4.28) * * 20.018 (3.06) * * 2 0.015 (2.57) *
Pub admn.a 2 0.059 (7.26) * * 20.039 (4.36) * * 20.032 (3.48) * * 2 0.029 (3.27) * *
1989a 0.039 (4.69) * * 0.030 (3.94) * * 0.017 (2.40) * 0.020 (2.80) * *
1990a 0.013 (1.60) 0.009 (1.19) 20.000 (0.06) 0.002 (0.30)
1996a 0.023 (2.92) * * 0.019 (1.81) 0.010 (1.05) 0.015 (1.52)
1998a 0.026 (3.12) * * 0.031 (2.44) * 0.023 (1.96) 0.029 (2.39) *
2000a 0.020 (2.39) * 0.032 (2.18) * 0.025 (1.81) 0.034 (2.39) *
Small empa 0.021 (3.57) * * 0.005 (0.84) 0.009 (1.69)
Medium empa 0.016 (2.83) * * 0.009 (1.67) 0.011 (2.09) *
Large empa 0.014 (2.38) * 0.011 (2.08) * 0.013 (2.41) *
Hrs work per week 0.000 (0.10) 0.000 (0.75) 0.000 (0.67)
Tenure 20.000 (13.26) * * 20.000 (10.35) * * 2 0.000 (10.51) * *
Tenure squared 0.000 (8.36) * * 0.000 (6.29) * * 0.000 (6.18) * *
Uniona 20.011 (1.97) * 20.001 (0.20) 2 0.001 (0.11)
Age 0.001 (1.23) 0.001 (0.67) 0.000 (0.56)
Urbana 0.009 (2.04) * 0.011 (2.72) * * 0.009 (2.38) *
Num. of jobs ever
held 0.002 (2.26) * 0.002 (2.53) * 0.002 (2.11) *
Unemployment rate 0.008 (3.59) * * 0.007 (3.39) * * 0.008 (3.49) * *
Unmarried w/chd. ,
6 yrsa 0.020 (2.36) * 0.018 (2.12) * 0.018 (2.18) * Table II.
Unmarried w/chd. . Determinants of
6 yrsa 20.017 (2.56) * 20.016 (2.44) * 2 0.016 (2.59) * * turnover probit
Married w/o chd. a 20.021 (3.60) * * 20.017 (3.04) * * 2 0.017 (2.97) * * analysis marginal
(continued) effects shown
JES
39,6 (1) (2) (3) (4)
Married w/chd.
, 6 yrsa 0.013 (2.60) * * 0.016 (3.20) * * 0.018 (3.67) * *
Married w/chd.
. 6 yrsa 20.022 (3.89) * * 20.018 (3.34) * * 2 0.017 (3.20) * *
666 Log real wage 20.034 (8.12) * * 2 0.031 (7.44) * *
Fringe benefitsa 20.076 (10.35) * * 2 0.067 (9.45) * *
Promotiona 20.036 (7.88) * * 2 0.032 (7.06) * *
Like job very mucha 2 0.007 (1.83)
Dislike job
somewhata 0.062 (7.88) * *
Dislike job very
mucha 0.125 (9.25) * *
Log likelihood 24,722.817 2 4,463.95 24,333.17 24,255.37
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Quits
PRPa 20.021 (6.38) * * 2 0.014 (4.53) * * 20.007 (2.12) * 20.005 (1.69)
Log likelihood 2 3,498.14 23,342.45 2 3,265.38 23,194.54
Pseudo R 2 0.066 0.108 0.128 0.147
Observations 17,114 17,114 17,114 17,114
Layoffs
PRPa 20.015 (6.32) * * 2 0.010 (4.82) * * 20.007 (3.18) * * 20.006 (3.05) * *
Log likelihood 2 2,192.83 22,080.94 2 2,038.99 22,031.31
Pseudo R 2 0.067 0.114 0.132 0.135
Table III. Observations 17,114 17,114 17,114 17,114
Determinants of quits
and layoffs probit Notes: Significant at: *5 and * *1 percent; adF/dx is for discrete change of dummy variable from 0 to 1;
analysis marginal z and P . jzj correspond to the test of the underlying coefficient being 0; absolute value of z-statistics
effects shown in parentheses; regressions (1)-(4) include the same set of controls displayed in Table II (1)-(4)
workers with young children are more likely to experience turnover, while parents with
older children and those without children are less likely to experience turnover.
Adding the log hourly real wage, fringe benefits, and promotions further reduces the
PRP coefficient reported in Table II, Specification 3, from 2.7 to 1.5 percent. The large
reduction in the PRP coefficient between Specifications 2 and 3 is likely due to the large
impact compensation has on job satisfaction and turnover. Adding the compensation
variables turns many of the previously significant covariates insignificant. For example,
coefficients for professional and managerial occupation fall to insignificance between
2 and 3. A likely explanation is that professional and managerial professions pay
relatively more than other occupations. Once controls for compensation are added,
the coefficients for managerial and professional occupations become insignificant.
Performance pay
(1) (2) (3) (4)
and employee
Turnover turnover
Bonusesa 2 0.017 (2.76) * * 20.013 (2.32) * 2 0.005 (0.80) 2 0.003 (0.47)
Stock optionsa 2 0.041 (2.57) * 20.037 (2.54) * 2 0.032 (2.22) * 2 0.032 (2.19) *
Other PRPa 2 0.009 (0.68) 20.009 (0.75) 2 0.004 (0.38) 2 0.002 (0.19)
Profit sharinga 2 0.043 (9.67) * * 20.029 (6.70) * * 2 0.018 (4.06) * * 2 0.017 (3.92) * *
Log likelihood 24,700.63 2 4,451.31 2 4,326.30 24,248.40
667
Pseudo R 2 0.077 0.126 0.150 0.166
Quits
Bonusesa 2 0.004 (0.89) 20.002 (0.54) 0.003 (0.73) 0.005 (1.07)
Stock optionsa 2 0.022 (1.80) 20.020 (1.81) 2 0.017 (1.49) 2 0.016 (1.43)
Other PRPa 0.008 (0.72) 0.007 (0.67) 0.009 (0.95) 0.011 (1.18)
Profit sharinga 2 0.027 (7.53) * * 20.018 (5.30) * * 2 0.011 (3.29) * * 2 0.010 (3.16) * *
Log likelihood 23,482.35 2 3,333.23 2 3,259.11 23,187.83
Pseudo R 2 0.070 0.110 0.129 0.149
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Layoffs
Bonusesa 2 0.011 (3.31) * * 20.009 (3.15) * * 2 0.007 (2.42) * 2 0.007 (2.34) *
Stock optionsa 2 0.019 (1.87) 20.015 (1.78) 2 0.014 (1.70) 2 0.014 (1.70)
Other PRPa 2 0.014 (2.07) * 20.011 (2.02) * 2 0.010 (1.85) 2 0.010 (1.81)
Profit sharinga 2 0.014 (5.50) * * 20.008 (3.59) * * 2 0.005 (2.09) * 2 0.005 (2.03) *
Log likelihood 22,180.52 2 2,071.27 2 2,031.73 22,024.26
Pseudo R 2 0.072 0.118 0.135 0.138
Observations 17,114 17,114 17,114 17,114
Notes: Significant at: *5 and * *1 percent; adF/dx is for discrete change of dummy variable from 0 to Table IV.
1; z and P . jzj correspond to the test of the underlying coefficient being 0; absolute value of z Turnover by PRP
statistics in parentheses; regressions (1)-(4) include the same set of controls displayed in Table II, type probit
(1)-(4); also, coefficients for piece rates, commissions and tips were omitted from the above table for analysis marginal
brevity since they were not significantly different from zero in any of the above estimations effects shown
The same types of interactions also cause other coefficients to become insignificant due
to the high correlation between pay and other aspects of job quality. However, the PRP
coefficient remains statistically significant. As shown in Table II Specification 3, a higher
log real wage is associated with lower turnover, while the presence of other fringe
benefits or a recent promotion reduces the probability of turnover.
Lastly, adding job satisfaction controls causes the PRP coefficient to fall from
1.5 to 1.3 percent, as displayed in Table II, Specification 4. Those that state that they either
dislike their job somewhat or very much have higher rates of turnover. Consequently,
initial estimations reveal that PRP generally reduces turnover, despite the inclusion of
many known major determinants of turnover. Moreover, female workers remain more
likely to experience turnover as do those at larger employers and those caring for young
children. Workers who receive on-the-job training, work in public administration, or do
not have young children are less likely to experience turnover. Also, the compensatory
variables remain negatively significant, but at slightly reduced magnitudes.
Does the aggregated PRP measure have a different impact on quits than layoffs?
Table III separates turnover into quits and layoffs while including identical controls as
those presented in Table II[5]. As previously observed, adding additional sets of
variables known to influence turnover reduces the PRP coefficient on both quits
and layoffs. Adding non-compensation and compensation-related variables in Table III
Specifications 1-3 reduce the PRP coefficient on quits from 2.1 to 0.7 percent.
JES However, adding job satisfaction variables reduces the PRP coefficient to
39,6 insignificance as shown in Specification 4 for quits. With regards to layoffs, the
PRP coefficient falls from 1.5 percent in Specification 1 to 0.6 percent in Specification 4.
Nonetheless, the PRP coefficient remains negatively significant even after inclusion of
measures of job satisfaction, as well as non-pecuniary and pecuniary aspects of the job.
Consequently, estimations support the hypothesis that PRP participation results in
668 reduced turnover, especially layoffs. However, the observed negative correlation
between PRP and turnover does not provide any evidence concerning which specific
PRP schemes matter most in influencing turnover decisions.
Including indicators for the various PRP schemes as well as an indicator for
participation in multiple PRP schemes reveal that profit sharing tends to reduce
turnover, especially quits. Table IV displays the effect of the different PRP schemes on
turnover when all PRP schemes are added into the specification together[6]. Profit
sharing and stock options significantly reduce turnover, even after inclusion of all
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
available controls in Specification 4. Bonuses initially reduce turnover, but this falls
to insignificance with inclusion of the compensatory covariates. Moreover, piece rates,
commissions, tips, and other forms of PRP have no significant impact on turnover.
Also, the coefficient for multiple PRP plans is insignificant. Thus, except for profit
sharing and stock options, there may be correlated omitted variables that, when included,
cause the negative correlation between the other PRP schemes and turnover to vanish.
Separating turnover into quits and layoffs reveal a slightly different pattern where
stock options no longer appear to significantly influence quits. However, profit sharing
remains negatively significant, suggesting it has an influence distinct from the other
PRP schemes. Additionally, bonuses have a slight negative impact on layoffs which
fails to vanish in the full specification. Moreover, including profit sharing alone in
Specification 4 without the other PRP variables reveals that profit sharing significantly
reduces the probability of both quits and layoffs, while stock options have a weak
negative impact on layoffs. All other PRP coefficients remain insignificantly different
from zero when added separately into the fullest specification. Consequently, the profit
sharing result is unlikely to be due to multi-collinearity; however, the other results
could be insignificant due to multi-collinearity. If one expected the profit sharing result
to arise out of multi-collinearity, one would expect the profit sharing result to be
significant when included with the other PRP schemes, but insignificant when included
individually. Whether included individually or together with the other PRP schemes,
the level of significance and size of profit sharing coefficient do not change.
Consequently, the aggregated PRP measure appears to generally reduce turnover. Yet,
breaking down the PRP measure by type, I find that PRP schemes dependent on a
firms profitability such as profit sharing have a consistently significant negative
impact on turnover and layoffs, and to some extent, quits.
Given the large amount of self-selection known to be associated with PRP, it is essential
to control for individual effects. This is done by estimating fixed and random-effects
probit models including all available determinants of turnover. The fixed-effect probit
models are estimated using LIMDEPs fixed-effects probit procedure[7].
When estimating fixed-effects models, sample sizes shrink because workers with no
variation in status are dropped from the sample. Additionally, coefficients for time
invariant determinants such as gender, race, and AFQT score cannot be estimated.
Furthermore, fixed-effects estimates increase measurement error which often makes it
difficult to obtain precise and statistically significant results. Initially, to check the Performance pay
robustness of earlier results, all prior estimations were repeated using a fixed-effects and employee
procedure. These estimations reveal a similar pattern as shown in Tables II-IV, except for
a few minor deviations in magnitude and significance[8]. In the fixed-effects estimations, turnover
the size of the fixed-effects is not of great consequence since they are individual
components of turnover propensity not associated with the independent variables and
hence will not be discussed. 669
Another difficulty inherent in the fixed-effects estimations is that these estimations
may be picking up movement between the differing forms of PRP as opposed to
capturing the intended influence of movement from non-PRP to PRP jobs on turnover
proclivities. If moving from a non-PRP to a PRP job is associated with positive rents,
one would expect to see lower turnover among PRP workers. However, if one is moving
from one PRP scheme to another, there may be no rents and hence no difference in
turnover associated with the PRP scheme. Consequently, the fixed-effects estimations
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
should ideally only identify movements from a non-PRP job to a PRP job. Since the
fixed-effects estimations involve a small and select sample, I do not expect there to be
much movement across PRP schemes. Nevertheless, to further limit the possibility of
capturing movement across PRP schemes, I created three categories: profit sharing,
all other PRP besides profit sharing, and those who have neither, and then included
them in the fixed-effects estimations. This should minimize the possibility of capturing
movement from one PRP scheme to another since there are now only two schemes,
profit sharing and all other PRP schemes besides profit sharing.
As shown in Specifications 1-3 in Table V, controlling for individual effects reveals
that PRP workers remain less likely to experience job turnover and layoffs, but not
significantly less likely to quit. Disaggregating PRP by scheme as described above
reveals that those receiving profit sharing are less likely to experience turnover in the
form of both quits and layoffs (Table V, Specifications 4-6)[9]. The magnitude of
the marginal effect in each case actually increases after controlling for fixed-effects in
the estimations. Although not shown in Table V, the marginal effect for the PRP
coefficient in Specification 3 is now larger in magnitude (2 0.006 vs 2 0.046) than in the
V. Conclusion
Although there is a substantial literature on the relationship between profit sharing and
turnover, there is very little research on the influence of other types of PRP on job turnover.
This paper explores how various PRP schemes influence employee turnover. It also tests
whether profit sharing has a differential impact on turnover in comparison to other forms
of PRP. Analysis of NLSY79 data suggests that PRPs impact on labor market turnover
critically depends on which type of PRP the worker receives. I find that workers receiving
some form of PRP, regardless of type, have lower rates of employee turnover than workers
who do not, within the cohorts analyzed. This finding provides more empirical support for
the sorting model of PRP than the classic agency model. Furthermore, workers receiving
some form of PRP are less likely to quit and are much less likely to be fired than those not
receiving any form of PRP. Confirming Azfar and Danninger (2001), Green and Heywood
(2008) and Kruse et al. (2010), these results appear to be mainly driven by profit based pay
schemes, especially profit sharing[11]. Although one would expect the influence of other
PRP schemes to mimic that of profit sharing, evidence suggests otherwise. When one
isolates the impact of the separate PRP schemes on turnover, only those receiving profit
sharing are significantly less likely to experience turnover.
Empirical evidence also supports the Weitzman theory (1985) that profit
sharing enables marginal labor costs to vary with profitability, hence reducing the
incentive to shed workers during downturns. Accordingly, further reliance on shared
capitalism in the form of profit sharing based on firm profitability may help mitigate
the problem of unemployment as well as enhancing productivity and incentivizing
employees.
Notes Performance pay
1. Light and McGarry (1998) note the difficulty in distinguishing voluntary and involuntary job and employee
separations within the NLSY. Specifically, they observe that a majority of workers
experiencing turnover report voluntary separations and a significant proportion (25 percent) turnover
report separations for other reasons. However, they do note that replacing their measures
of total separations with voluntary separations other than discharges or layoffs does not
qualitatively change their inferences concerning the influence job mobility has on wage
paths. Although potentially arbitrary, I code those who report separations for reasons of
671
layoffs, plant closings, end of temp or seasonal jobs, firings, or program endings as
involuntary separations (layoffs) while those who report separations as quits, regardless of
reasoning, as voluntary separations (quits).
2. Although the common practice is to take the log of employer size, results are not sensitive to
whether estimations include the log of establishment size or four separate size indicators
employed here.
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
3. The NLS constructs the unemployment rate by using state and area labor force data from
the May publication of Employment and Earnings for the month of March of each survey
year. If a respondent resides in a metropolitan area, then the unemployment rate is the
unemployment rate for that metropolitan area. Otherwise, the unemployment rate is the
computed balance of state unemployment rates for the state in which the respondent resides.
4. Logit estimations with and without fixed effects reveal a similar pattern as that shown using
probit analysis and are available from the author upon request.
5. The full estimation results, including all covariates, are available from the author upon
request.
6. Estimations including each PRP scheme separately in the four specifications reveal a similar
pattern as when they are added jointly. These estimations are available from the author
upon request.
7. See LIMDEP Manual Version 9 (2007) Panel Data Models for Binary Choice, p. E20-1-E20-17.
8. The full estimation results are available from the author upon request.
9. Fixed-effects estimations including all the PRP measures together in a single model were also
run for turnover, quits and layoffs. These estimations reveal that profit sharing reduces job
turnover and quits, but not layoffs. However, the profit sharing coefficient would be statistically
significant at the 10 percent level, suggesting a weak negative correlation between profit sharing
and layoffs. Accounting for individual heterogeneity causes the stock option coefficient to
become statistically insignificant, although it retains sign and size. This result suggests that it
may be imprecisely estimated due to the small number of changes occurring within individuals.
In a similar vein, fixed-effects estimations reveal a weak positive correlation between piece rate
and layoffs and a weak negative correlation between commissions and quits.
10. These estimations are available from the author upon request.
11. For theoretical explanations and further background concerning the influence of profit
sharing on productivity and employment stability, readers can reference Kruse (1993) and
Kruse et al. (2010).
References
Akerlof, G.A., Rose, A.K. and Yellen, J.L. (1988), Job switching and job satisfaction in the US
labor market, Brookings Papers on Economic Activity, Vol. 2, pp. 495-594.
Azfar, O. and Danninger, S. (2001), Profit sharing, employment stability, and wage growth,
Industrial and Labor Relations Review, Vol. 54 No. 3, pp. 619-30.
JES Baker, G.P. (1992), Incentive contracts and performance measurement, Journal of Political
Economy, Vol. 100 No. 3, pp. 598-614.
39,6
Bauer, T.K. (2004), High performance workplaces and job satisfaction: evidence from Europe,
IZA Discussion Paper No. 1265.
Benabou, R. and Tirole, J. (2003), Intrinsic and extrinsic motivation, Review of Economic
Studies, Vol. 70 No. 3, pp. 489-520.
672 Blakemore, A.E., Low, S.A. and Ormiston, M.B. (1987), Employment bonuses and labor
turnover, Journal of Labor Economics, Vol. 5 Nos 4, Part 2, pp. S124-35.
Booth, A.L. and Frank, J. (1999), Earnings, productivity, and performance-related pay, Journal
of Labor Economics, Vol. 17 No. 3, pp. 447-63.
Bronars, S.G. and Moore, C. (1995), Incentive pay, information, and earnings: evidence form
the NLSY, NLS Discussion Paper 95-23, US Department of Labor, Bureau of Labor
Statistics.
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Brown, C. (1990), Firms choice of method of pay, Industrial and Labor Relations Review, Vol. 43
No. 3, pp. 165-82.
Brown, M. (2001), Unequal pay, unequal response? Pay referents and their implications for pay
level satisfaction, Journal of Management Studies, Vol. 38 No. 6, pp. 879-96.
Brown, S. and Sessions, J.G. (2006), Some evidence on the relationship between performance
related pay and the shape of the experience-earnings profile, Southern Economic Journal,
Vol. 72 No. 3, pp. 660-76.
Chelius, J. and Smith, R.S. (1990), Profit sharing and employment stability, Industrial and Labor
Relations Review, Vol. 43 No. 3, pp. 256S-73S.
Clark, A., Georgellis, Y. and Sanfey, P. (1998), Job satisfaction, wage changes, and quits:
evidence from Germany, Research in Labor Economics, Vol. 17, pp. 95-121.
Cornelissen, T., Heywood, J.S. and Jirjahn, U. (2011), Performance pay, risk attitudes, and job
satisfaction, Labour Economics, Vol. 18 No. 2, pp. 229-39.
Curme, M. and Stefanec, N. (2007), Worker quality and labor market sorting, Economic Letters,
Vol. 96 No. 2, pp. 202-8.
Dale-Olsen, H. (2004), Wages, fringe benefits and worker turnover, Labour Economics,
Vol. 13 No. 1, pp. 87-105.
Elliott, R.F. and Murphy, P.D. (1986), The determinants of the coverage of PBR systems in
Britain, Journal of Economic Studies, Vol. 13 No. 3, pp. 38-50.
Evan, W.E. and MacPhearson, D.A. (1996), Firm size and employer turnover, Industrial and
Labor Relations Review, Vol. 49 No. 4, pp. 707-28.
Ewing, B.T. (1996), Wages and performance-based pay: evidence from the NLSY, Economic
Letters, Vol. 51 No. 2, pp. 241-6.
Freeman, R.B. (1978), Job satisfaction as an economic variable, American Economic Review,
Vol. 68 No. 2, pp. 135-41.
Frey, B.S. (1997), On the relationship between intrinsic and extrinsic work motivation,
International Journal of Industrial Organization, Vol. 15 No. 4, pp. 427-39.
Garboua, L.L., Montmarquette, C. and Simonnet, V. (2007), Job satisfaction and quits, Labour
Economics, Vol. 14 No. 2, pp. 251-68.
Geddes, L.A. and Heywood, J.S. (2003), Gender and piece rates, commissions, and bonuses,
Industrial Relations, Vol. 42 No. 3, pp. 419-44.
Goddard, J. (2001), High performance and the transformation of work the implications of Performance pay
alternative work practices for the experience and outcomes of work, Industrial and Labor
Relations Review, Vol. 54 No. 4, pp. 776-805. and employee
Golden, C. (1986), Monitoring costs and occupational segregation by sex: a historical analysis, turnover
Journal of Labor Economics, Vol. 4 No. 1, pp. 1-27.
Golden, C. (1990), Understanding the Gender Gap: An Economic History of American Women,
Oxford University Press, New York, NY. 673
Green, C. and Heywood, J.S. (2008), Does performance pay increase job satisfaction?,
Economica, Vol. 75 No. 300, pp. 710-28.
Green, C. and Heywood, J.S. (2010), Profit sharing, separation, and training, British Journal of
Industrial Relations, July.
Guthrie, J.P. (2000), Alternative pay practices and employee turnover: an organizational
economics perspective, Group & Organization Management, Vol. 25 No. 4, pp. 419-39.
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Hashimoto, M. (1979), Bonus payments, on-the-job training, and lifetime employment in Japan,
Journal of Political Economy, Vol. 87 No. 5, pp. 1086-104.
Heywood, J.S. and Wei, X. (2006), Performance pay and job satisfaction, Journal of Industrial
Relations, Vol. 48 No. 4, pp. 523-40.
Kennedy, P.W. (1995), Performance pay, productivity and morale, Economic Record, Vol. 71
No. 3, pp. 240-7.
Klein, K.J. and Hall, R.J. (1988), Correlates of employee satisfaction with stock ownership: who
likes an ESOP most?, Journal of Applied Psychology, Vol. 73 No. 4, pp. 630-8.
Kreps, D.M. (1997), Intrinsic motivation and extrinsic incentives, American Economic Review,
Vol. 87 No. 2, pp. 359-64.
Kruse, D. (1993), Profit Sharing: Does It Make a Difference?: The Productivity and Stability Effects
of Employee Profit-sharing Plans, W.E. Upjohn Institute for Employment Research,
Kalamazoo, MI.
Kruse, D.L., Freeman, R.B. and Blasi, J.R. (2010), Do workers gain by sharing?, in Kruse, D.L.,
Freeman, R.B. and Blasi, J.R. (Eds), Shared Capitalism at Work: Employee Ownership,
Profit and Gain Sharing, and Broad-based Stock Options, NBER, Chicago, IL, pp. 257-89.
Lazear, E.P. (1981), Agency, earnings profiles, productivity, and hours restrictions, American
Economic Review, Vol. 71 No. 4, pp. 606-20.
Lazear, E.P. (1986), Salaries and piece rates, Journal of Business, Vol. 59 No. 3, pp. 405-31.
Light, A. and McGarry, K. (1998), Job change patterns and the wages of young men, Review of
Economics & Statistics, Vol. 80 No. 2, pp. 276-86.
McCausland, W., Pouliakas, K. and Theodossiou, I. (2005), Some are punished and some are
rewarded: a study of the impact of performance pay on job satisfaction, International
Journal of Manpower, Vol. 26 Nos 7/8, pp. 636-59.
Milgrom, P. and Roberts, J. (1992), Economics, Organization and Management, Prentice-Hall,
New York, NY.
Parent, D. (1999), Methods of pay and earnings: a longitudinal analysis, Industrial and Labor
Relations Review, Vol. 53 No. 1, pp. 71-85.
Pencavel, J.H. (1972), Wages, specific training, and labor turnover in US manufacturing
industries, International Economic Review, Vol. 13 No. 1, pp. 53-64.
Royalty, A.B. (1996), The effects of job turnover on the training of men and women, Industrial
and Labor Relations Review, Vol. 49 No. 3, pp. 506-21.
JES Saneyoshi, Y. (2001), Employee behavior and company stock ownership, doctoral dissertation,
Harvard University, Cambridge, MA.
39,6 Scoppa, V. (2003), The role of turnover costs in the enforcement of performance-related pay
contracts, Metroeconomica, Vol. 51 No. 1, pp. 60-78.
Seiler, E. (1984), Piece rates vs. time rates: the effect of incentives on earnings, The Review of
Economics and Statistics, Vol. 66 No. 3, pp. 363-76.
674 Sliwka, D. and Grund, C. (2006), Performance pay and risk aversion, IZA Discussion Paper
No. 2012, March.
Weitzman, M.L. (1985), The simple macroeconomics of profit-sharing, American Economic
Review, Vol. 75 No. 5, pp. 937-53.
Further reading
Blinder, A.S. (1990), Paying for Productivity: A Look at the Evidence, The Brookings Institution
Downloaded by IQRA UNIVERSITY At 08:14 27 April 2015 (PT)
Corresponding author
Patrick L. OHalloran can be contacted at: pohallor@monmouth.edu