Performance Pay, Union Bargaining and Within‐Firm Wage Inequality

36 Pages Posted: 3 May 2012

See all articles by Erling Barth

Erling Barth

Institute for Social Research, Norway; Department of Economics, University of Oslo; IZA Institute of Labor Economics

Bernt Bratsberg

Kansas State University - Department of Economics; University of Oslo - Ragnar Frisch Centre for Economic Research

Torbjørn Hægeland

Statistics Norway

Oddbjorn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research

Date Written: June 2012

Abstract

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.

JEL Classification: J31, J33

Suggested Citation

Barth, Erling and Bratsberg, Bernt and Hægeland, Torbjørn and Raaum, Oddbjørn, Performance Pay, Union Bargaining and Within‐Firm Wage Inequality (June 2012). Oxford Bulletin of Economics and Statistics, Vol. 74, Issue 3, pp. 327-362, 2012, Available at SSRN: https://ssrn.com/abstract=2050240 or http://dx.doi.org/10.1111/j.1468-0084.2011.00656.x

Erling Barth (Contact Author)

Institute for Social Research, Norway ( email )

Munthesgate 31
0260 Oslo
Norway

Department of Economics, University of Oslo ( email )

PO Box 6706 St Olavs plass
Oslo, N-0317
Norway

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bernt Bratsberg

Kansas State University - Department of Economics ( email )

Manhattan, KS 66502-4001
United States

University of Oslo - Ragnar Frisch Centre for Economic Research

Gaustadalleen 21
N-0349 Oslo
Norway

Torbjørn Hægeland

Statistics Norway

N-0033 Oslo
Norway

Oddbjørn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0317 Oslo
Norway

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
294
PlumX Metrics