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The Performance Pay Premium and Wage Dispersion in Britain

Author

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  • Alex Bryson
  • John Forth
  • Lucy Stokes

Abstract

Estimates of the performance pay (PP) premium using household survey data are upwardly biased due to the use of PP contracts in higher paying workplaces. Using nationally representative linked employer†employee data we estimate the PP premium at the mean and across the wage distribution, after accounting for workplace heterogeneity. We then present the effects of PP on the wage distribution. Failure to account for the use of PP in high paying workplaces overstates the PP premium by one†third. The premium rises as one moves up the wage distribution, but the effect is more modest after having accounted for workplace heterogeneity.

Suggested Citation

  • Alex Bryson & John Forth & Lucy Stokes, 2018. "The Performance Pay Premium and Wage Dispersion in Britain," Manchester School, University of Manchester, vol. 86(2), pages 139-154, March.
    • Handle: RePEc:bla:manchs:v:86:y:2018:i:2:p:139-154
    DOI: 10.1111/manc.12174
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    Cited by:

    1. Theodoropoulos, Nikolaos & Forth, John & Bryson, Alex, 2019. "Are Women Doing It For Themselves? Gender Segregation and the Gender Wage Gap," IZA Discussion Papers 12657, Institute of Labor Economics (IZA).
    2. John Forth & Nikolaos Theodoropoulos & Alex Bryson, 2023. "The role of the workplace in ethnic wage differentials," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 259-290, June.
    3. Melanie Jones, 2024. "Disability and trade union membership in the UK," British Journal of Industrial Relations, London School of Economics, vol. 62(1), pages 28-49, March.
    4. Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2021. "Hierarchy and the Employer Size Effect on Wages: Evidence from Britain," Economica, London School of Economics and Political Science, vol. 88(351), pages 671-696, July.
    5. Melanie Jones & Ezgi Kaya, 2024. "Performance‐related pay and the UK gender pay gap," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(4), pages 512-529, October.
    6. Paul A. Schulte & George L. Delclos & Sarah A. Felknor & Jessica M. K. Streit & Michelle McDaniel & L. Casey Chosewood & Lee S. Newman & Faiyaz A. Bhojani & Rene Pana-Cryan & Naomi G. Swanson, 2022. "Expanding the Focus of Occupational Safety and Health: Lessons from a Series of Linked Scientific Meetings," IJERPH, MDPI, vol. 19(22), pages 1-21, November.
    7. Nikolaos Theodoropoulos & John Forth & Alex Bryson, 2022. "Are Women Doing It for Themselves? Female Managers and the Gender Wage Gap," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(6), pages 1329-1355, December.

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