Hourly Versus Salaried Payment and Decisions About Trading Off Time and Money Over Time

Posted: 5 Oct 2010

See all articles by Sanford E. Devoe

Sanford E. Devoe

University of Toronto - Joseph L. Rotman School of Management

Byron Y. Lee

University of Toronto

Jeffrey Pfeffer

Stanford Graduate School of Business

Date Written: July 1, 2010

Abstract

Using longitudinal data from the British Household Panel Survey, the authors examine how individuals’ employment compensation - salaried or hourly - affects their decisions to trade time for money. Results indicate that there is a positive association between hourly wages and a desire to exchange leisure time for more money. This relationship holds even when a fixed-effects model controls for unobserved differences among individuals as well as for job-relevant factors including income, hours worked, tenure, and satisfaction. Evidence also suggests that after changing jobs in which pay schemes change from hourly to salaried, individuals’ preferences remain the same in the short term, but effects of these preferences do decay over time, consistent with the notion of psychological salience.

Keywords: hourly wage, money, pay practices, time

JEL Classification: J30, J32

Suggested Citation

Devoe, Sanford E. and Lee, Byron Y. and Pfeffer, Jeffrey, Hourly Versus Salaried Payment and Decisions About Trading Off Time and Money Over Time (July 1, 2010). Industrial and Labor Relations Review, Vol. 63, No. 4, 2010, Available at SSRN: https://ssrn.com/abstract=1687257

Sanford E. Devoe (Contact Author)

University of Toronto - Joseph L. Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Byron Y. Lee

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

Jeffrey Pfeffer

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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