Using an econometric procedure that corrects for both self-selection of individuals into their preferred compensation scheme and wage endogeneity, this study investigates whether significant differences exist in the job satisfaction of individuals receiving performance-related pay (PRP) compared to those on alternative compensation plans. Using data from four waves of the British Household Panel Survey (BHPS), it is found that PRP exerts a positive effect on the mean job satisfaction of (very) high-paid workers only. A potential explanation for this pattern could be that for lower-paid employees PRP is perceived to be controlling, whereas higher-paid workers derive a utility benefit from what they regard as supportive reward schemes. Using PRP as an incentive device in the UK could therefore be counterproductive in the long run for certain low-paid occupations.
|Publisher||Centre for European Labour Market Research|
|Number of pages||42|
|Publication status||Published - Jan 2007|
|Name||University of Aberdeen Business School Working Paper Series|
McCausland, W. D., Pouliakas, K., & Theodossiou, I. (2007). Some are punished and some are rewarded: A study of the impact of performance pay on job satisfaction. (University of Aberdeen Business School Working Paper Series; Vol. 2007, No. 06). Centre for European Labour Market Research. http://hdl.handle.net/2164/108