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Hourly versus Salaried Payment and Decisions about Trading Time and Money over Time

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  • Sanford E. Devoe
  • Byron Y. Lee
  • Jeffrey Pfeffer

Abstract

Using longitudinal data from the British Household Panel Survey, the authors examine how individuals' employment compensation—salaried or hourly—affects their decisions to trade time for money. Results indicate that there is a positive association between hourly wages and a desire to exchange leisure time for more money. This relationship holds even when a fixed-effects model controls for unobserved differences among individuals as well as for job-relevant factors, including income, hours worked, tenure, and satisfaction. Evidence also suggests that after changing jobs in which pay schemes change from hourly to salaried, individuals' preferences remain the same in the short term, but effects of these preferences do decay over time, consistent with the notion of psychological salience.

Suggested Citation

  • Sanford E. Devoe & Byron Y. Lee & Jeffrey Pfeffer, 2010. "Hourly versus Salaried Payment and Decisions about Trading Time and Money over Time," ILR Review, Cornell University, ILR School, vol. 63(4), pages 627-640, July.
    • Handle: RePEc:sae:ilrrev:v:63:y:2010:i:4:p:627-640
    DOI: 10.1177/001979391006300404
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    References listed on IDEAS

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    1. Altonji, Joseph G & Paxson, Christina H, 1988. "Labor Supply Preferences, Hours Constraints, and Hours-Wage Trade-Offs," Journal of Labor Economics, University of Chicago Press, vol. 6(2), pages 254-276, April.
    2. DeVoe, Sanford E. & Pfeffer, Jeffrey, 2007. "When time is money: The effect of hourly payment on the evaluation of time," Organizational Behavior and Human Decision Processes, Elsevier, vol. 104(1), pages 1-13, September.
    3. Sheldon E. Haber & Robert S. Goldfarb, 1995. "Does Salaried Status Affect Human Capital Accumulation?," ILR Review, Cornell University, ILR School, vol. 48(2), pages 322-337, January.
    4. Mark Aguiar & Erik Hurst, 2007. "Measuring Trends in Leisure: The Allocation of Time Over Five Decades," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(3), pages 969-1006.
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