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In this chapter we use data from industrial plants to find out whether seniority-based pay is used as a motivational device for production workers. Alternatively, seniority-based pay could simply be a wage-setting rule independent of incentives. Unlike previous papers, we use a direct measure of seniority-based pay as well as measures of monitoring devices and explicit incentives. We find that those firms that base their wages partly on seniority are less likely to offer explicit incentives. They are also less likely to invest in monitoring devices. We also discover that these companies are more likely to engage in other human resource management policies, which result in long employment relationships. Overall these results suggest that seniority-based pay is indeed used as a motivational device.

This paper examines the incidence of measurement error in wage data on the estimation of returns to seniority. Earnings surveys collect wage data through questions pertaining to earnings and hours over a given period of time (year, week) or through direct reports of hourly wages. Comparing results for different wage variables from the panel study of income dynamics (PSID), it is shown that estimated returns to seniority are very sensitive to the type of wage data used. Estimates based on yearly reports are typically twice as large as those using direct reports. Two sources account for this discrepancy. First, the inclusion of earnings from secondary jobs and overtime in the PSID annual earnings data tends to overestimate returns to seniority. Second, hourly wages computed from yearly measures include important measurement errors that tend to bias coefficients upward.

Efficiency wage theory predicts that firms can induce worker effort by the carrot of high wages and/or the stick of monitoring worker performance. Another option available to firms is to tilt the remuneration package over time such that the lure of high future earnings acts as a deterrent to current shirking. On the assumption that firms strive for the optimal trade-off between these various instruments, we develop a two-period model of efficiency wages in which increased monitoring attenuates the gradient of the wage-tenure profile. Our empirical analysis, using two cross sections of matched employer-employee British data, provides robust support for this prediction.

The aim of this article is to explore the current European debate over labour market flexibility. First, it considers lessons from economic theory. The classical consensus considering unemployment to be purely voluntary, the Keynesian consensus introducing the concept of demand deficient involuntary unemployment and finally the neo‐classical consensus returning us to the classical viewpoint of the dominance of real conditions in the labour market. In order to proceed without confusion the article provides a clear working definition of the natural rate of unemployment and its three main components, voluntary unemployment, structural unemployment and involuntary unemployment. It then proceed to analyse each of these main components in detail, illustrating the difference between a free market approach and a European Commission approach to reducing each component of unemployment. The article concludes that the future is dependent on all EU citizens as electors of governments and holders of wages to moderate.

Both academia and policymakers express a strong belief in higher average education levels exerting a narrowing impact on wage inequality in general and gender wage gaps in particular. The purpose of this paper is to scrutinize whether or not this effect extends to R&D- and export-intensive branches such as the technology industry.

In exploring the impact of individual and job-related background factors and, especially, of job-task evaluation schemes on the size and change in gender wage gaps in the technology industry, the paper applies an elaborated decomposition method based on unconditional quantile regression techniques.

While changes in standard human capital endowments can explain little, if anything, of the growth in real wages or the widening of wage dispersion among the Finnish technology industry's white-collar workers, a new job-task evaluation scheme introduced in 2002 seems to have succeeded, at least in part, to make the wage-setting process more transparent by re-allocating especially the technology industry's female white-collar workers in a way that better reflects their skills, efforts and responsibilities.

One crucial implication of this finding is that improving the standard human capital of women closer to that of men will not suffice to narrow the gender wage gap in the advanced parts of the economy and, hence, not also the overall gender wage gap. The reason is obvious: concomitant with rising average education levels, other skill aspects have received increasing attention in working life. Consequently, a conscious combination of formal and informal competencies as laid down in well-designed job-task evaluation schemes may, in many instances, offer a more powerful path for tackling the gender wage gap.

While the existing evidence on the impact of performance-related pay on gender wage gaps is still scarce but growing the authors know of no empirical studies analyzing the gender pay-gap effect of job-task evaluation systems.

The purpose of this paper is to provide a comprehensive review and critique of what we already know about pay systems in Chinese state‐owned enterprises, to identify the gaps in the literature and to stimulate more research in this area.

The paper first describes the policy issues at the macro‐level (government policies) in order to put micro‐level pay practices in a pertinent context. Then the paper provides a detailed review and critique on current empirical studies on pay practices in Chinese enterprises, their antecedents and consequences. Finally, the paper identifies potential research questions and provides some directions for future research.

The paper concludes from the extensive review of the current literature that the following research areas merit attention: Why do some firms pay their employees more than other firms? Why do we observe different types of internal pay structures among firms? What are the consequences of these different structures? Why is the link between pay and performance weak in some firms but strong in others? Under what conditions pay‐for‐performance enhances firm performance?

The paper is one of the most comprehensive reviews of the literature on compensation practices of Chinese companies.

The authors' work aims to identify the employer-specific drivers of the college (or university) wage gap, which has been identified as one of the major determinants of the dynamics of overall wage and income inequality in the past decades. The authors focus on three employer-level features that can be associated with asymmetries in the employment relation orientation adopted for college and non-college-educated employees: (1) size, (2) the share of standard employment and (3) the pervasiveness of incentive pay schemes.

The authors' establishment-level analysis (data from the Basic Survey on Wage Structure (BSWS), 2005–2018) focusses on Japan, an economy characterised by many unique economic and institutional features relevant to the aims of the authors' analysis. The authors use an adjusted measure of firm-specific college wage premium, which is not biased by confounding individual and establishment-level factors and reflects unobservable characteristics of employees that determine the payment of a premium. The authors' empirical methods account for the complexity of the relationships they investigate, and the authors test their baseline outcomes with econometric approaches (propensity score methods) able to address crucial identification issues related to endogeneity and reverse causality.

The authors' findings indicate that larger establishment size, a larger share of regular workers and more pervasive implementation of IPSs for college workers tend to increase the college wage gap once all observable workers, job and establishment characteristics are controlled for. This evidence corroborates the authors' hypotheses that a larger establishment size, a higher share of regular workers and a more developed set-up of performance pay schemes for college workers are associated with a better capacity of employers to attract and keep highly educated employees with unobservable characteristics that justify a wage premium above average market levels. The authors provide empirical evidence on how three relevant establishment-level characteristics shape the heterogeneity of the (adjusted) college wage observed across organisations.

The authors' contribution to the existing knowledge is threefold. First, the authors combine the economics and management/organisation literature to develop new insights that underpin the authors' testable empirical hypotheses. This enables the authors to shed light on employer-level drivers of wage differentials (size, workforce composition, implementation of performance-pay schemes) related to many structural, institutional and strategic dimensions. The second contribution lies in the authors' measure of the “adjusted” college wage gap, which is calculated on the component of individual wages that differs between observationally identical workers in the same establishment. As such, the metric captures unobservable workers' characteristics that can generate a wage premium/penalty. Third, the authors provide empirical evidence on how three relevant establishment-level characteristics shape the heterogeneity of the (adjusted) college wage observed across organisations.

The paper aims to examine factors that influence individuals' preferences between wages indexed on job performance or efficiency over equity-based wages.

Generalized linear latent and mixed models (GLLAMM) are estimated on the 2005 wave of the World Values Survey on employed individuals from 43 countries.

Results suggest that employees' preference for efficiency-based wages increases with education and globalization, while it decreases with unemployment rates.

Institutions and specifically public policies that promote education, and globalization, along with policies that reduce unemployment rates could be used to promote wage setting policies that reward performance or efficiency.

The originality of the study lies in its use of both individual- and country-level data to estimate GLLAMM that take into account the multi-level nature of the dataset. This study can inform firms and policymakers on what measures to adopt to promote preferences for efficiency-based wages among individuals.