Does Salaried Status Affect Human Capital Accumulation?

Abstract

Human capital studies do not usually consider whether an individual is paid an hourly wage or a salary. The authors of this paper develop a conceptual framework that explains why some workers are paid salaries and predicts that salaried workers will invest more in human capital than will hourly workers. In particular, this prediction hinges on the differing effort incentives facing hourly and salaried workers, and their employers, in jobs that are paced versus unpaced. Empirical evidence supporting this prediction and other hypotheses implied by the proposed framework is presented using data on individuals covering a 16-month period in 1984–85 from the Bureau of Census Survey of Income and Program Participation (SIPP), a longitudinal survey.

Canadian Evidence on the Hourly Paid–Salaried Breakdown: Are Canadian Salaried Workers Missing Too?

“…Hamermesh observes that this increase is surprising in that hourly pay is associated with blue-collar and less-skilled jobs, so that increases in the skill level of the workforce and trends in employment by industry and occupation should surely have decreased the share paid hourly. Yet this is not what Hamermesh or Haber and Goldfarb (1995) find for the United States. In Canada, roughly one-half of employees are paid by the hour.…”

“…Goldfarb (1987), Fama (1991), and Haber and Goldfarb (1995) ask why employers may choose to pay positions by the hour rather than pay a salary. These discussions note that hourly pay provides workers with direct incentives to avoid absenteeism and rewards high output and effort in jobs where these outcomes are closely related to hours of work.…”

“…In Canada, the rise in wage inequality was much smaller than in the United States, yet the rise in the share paid hourly was larger. 14 Explaining the Rise: Theoretical Perspectives Goldfarb (1987), Fama (1991), and Haber and Goldfarb (1995) ask why employers may choose to pay positions by the hour rather than pay a salary. These discussions note that hourly pay provides workers with direct incentives to avoid absenteeism and rewards high output and effort in jobs where these outcomes are closely related to hours of work.…”

12 Million Salaried Workers are Missing

“…retical examination, formal or informal, of the determinants of the type of time-rated pay that is offered. Empirical examination of these determinants appears to be completely lacking, and only one study (Haber and Goldfarb 1995) has presented evidence documenting changes in the prevalence of hourly pay (for the first half of the time period examined here). This research gap is surprising given the ubiquity of this distinction in the American workplace and its importance in workers' minds.…”