Bayo-Moriones, Alberto, Galdon-Sanchez, Jose E. and Guell, Maia (2004) Is seniority-based pay used as a motivation device? Evidence from plant level data. CEPDP, 646. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753017768
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Abstract
In this paper we use data from industrial plants to investigate if seniority-based pay is used as a motivational device for production workers. Alternatively, seniority-based pay could simply be a wage setting rule not necessarily related to the provision of incentives. Unlike previous papers, we use a direct measure of seniority-based pay as well as measures of monitoring devices and piece-rates. We find that firms that offer seniority-based pay are less likely to offer explicit incentives. They are also less likely to invest in monitoring devices. We also find that firms that offer seniority-based pay are more likely to engage in other human resource management policies that result in long employment relationships. Overall these results suggest that seniority-based pay is indeed used as a motivation device.
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