Performance Pay and Workplace Injury: Panel Evidence

Abstract

Using panel survey data, we show cross-sectional evidence of an elevated risk of workplace injury for those paid piece rates and bonuses. While consistent with Adam Smith's behavioural conjecture, this could simply reflect sorting across workers or firms. In response we successively control for a risk proxy, for worker fixed effects and for worker with employer match fixed effects. No previous examination has controlled for such fixed effects or examined US survey data. The estimates indicate that injury risk increases substantially when blue-collar (manual) workers become paid by piece rates and bonuses.

Pay Matters: The Piece Rate and Health in the Developing World

“…26,27 Recent evidence suggests that gains in productivity may be offset by maladaptive worker behaviors (including those detrimental to health) that ultimately increase operating costs and lower profits. 21 Based on the existing research, it is unclear whether there remains a modern-day business case for piece rate pay in occupationally hazardous industries. This is particularly true in the developing world, where a culture of abuse can notably lessen a worker's sense of control over their own output, which could weaken or even reverse the standard productivity boost observed under a piece rate system.…”

Work-stress factors associated with truck crashes: An exploratory analysis

“…Piecework payment therefore tends to put productivity pressure on the driver. Specifically, Thompson et al show the inherent logic of work pressure using a simulation of an agent-based model in which economic pressures create incentives for risky behavior (Artz and Heywood, 2015; Braver et al, 1992; Prendergast, 1999; Thompson et al, 2015).…”

The unintended consequences of the rat race: the detrimental effects of performance pay on health

“…The other two papers are by Bender et al (2012) and Artz and Heywood (2013). Both focus on the link between performance pay and workplace injury.…”

“…Bender et al (2012) use a Europe-wide cross-sectional dataset (the European Working Conditions Survey) to find a strongly robust relationship between workers with piece rates experience and higher probabilities of workplace injury, ceteris paribus. Artz and Heywood (2013) employ the US National Longitudinal Survey of Youth to find that this relationship exists even when controlling for individual and individual-employer fixed effects.…”