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The performance pay premium: how big is it and does it affect wage dispersion?

Bryson, Alex, Forth, John and Stokes, Lucy (2014) The performance pay premium: how big is it and does it affect wage dispersion? IZA discussion papers (8360). Institute for the Study of Labor (IZA), Bonn, Germany.

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Using nationally representative linked employer-employee data we find one-quarter of employees in Britain are paid for performance. The log hourly wage gap between performance pay and fixed pay employees is .36 points. This falls to .15 log points after controlling for observable demographic, job and workplace characteristics. It falls still further to .10 log points when comparing "like" employees in the same workplace, indicating that performance pay contracts are used in higher paying workplaces. The premium rises markedly as one moves up the wage distribution: it is seven times higher at the 90th percentile than it is at the 10th percentile in the wage distribution (.42 log points compared to .06 log points).

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2014 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods
Date Deposited: 08 Jan 2015 15:38
Last Modified: 08 Jan 2021 01:17
Projects: ES/I035846/1
Funders: Economic and Social Research Council

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