Methods of pay and earnings: A longitudinal analysis

Using data from the National Longitudinal Survey of Youth (1988-90), the au thor investigates the relationship between methods of pay, including piece rates and bonuses, and the level and variance of wages. Among men, piece ra te workers earned a premium compared to other workers, but the evidence on bonuses is mixed. The author finds evidence that female piece rate workers earned more than other female workers once a control variable for the prese nce of dependents is interacted with the piece rate variable. With controls for the wage effects of schooling and experience, unobserved worker produc tivity is found to have accounted for most of the wage variance among both male and female piece rate workers; wage variance among workers not having explicit pay for performance schemes, in contrast, was predominantly due to other factors.