Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 17: Problem 3

A study found that the number of jobs in which firms used bonuses, commissions, or piece rates to tie workers' pay to their performance increased from an estimated 30 percent of all jobs in the 1970 s to 40 percent in the \(1990 \mathrm{~s}\). Why would systems that tie workers' pay to how much they produce have become increasingly popular with firms? The same study found that these pay systems were more common in higher-paid jobs than in lower-paid jobs. Briefly explain this result.

Short Answer

Expert verified
Performance-based pay systems became popular as they incentivize improved productivity, increase job satisfaction and employee retention. They are more common in higher-paid jobs as these roles have a larger impact on company performance and the employees often have greater motivation for potential extra earnings.

Step by step solution

01

Analyze the increase in performance-based pay

There could be several reasons that made performance-based pay systems more popular over time. One reason might be the increased competition in the job market. Firms are trying to incentivize their workers to improve productivity to stay competitive. Other reasons could include improved employee satisfaction and retention as workers feel directly rewarded for their work contribution. Next, it's important to understand why performance-based pay is more prevalent in higher-paid jobs.
02

Relation of performance-based pay with higher-paid jobs

Higher-paid jobs usually require more skills and expertise, meaning the impact of their work on the firm's overall performance is more significant. Therefore, linking their pay to performance could significantly boost the company's productivity and profits. Furthermore, employees in these positions could be more driven by the possibility of earning bonuses or commissions, improving job satisfaction and commitment.
03

Conclusion

In conclusion, performance-based pay systems gained popularity due to their ability to incentivize workers, increase productivity, and improve employee satisfaction. They are more common in higher-paid jobs because these positions can significantly impact the overall company performance and employees in these positions are often more motivated by the potential for higher earnings.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What are the two ways that the productivity of a firm's employees may increase when a firm moves from straighttime pay to commission or piece-rate pay? If piece-rate or commission systems of compensating workers have important advantages for firms, why don't more firms use them?

Over time, the gap between the wages of workers with college degrees and the wages of workers without college degrees has been increasing. Shouldn't this gap have raised the incentive for workers to earn college degrees, thereby increasing the supply of college-educated workers and reducing the size of the gap?

Why is the demand curve for labor downward sloping?

The total amount of oil in the earth is not increasing. Does this mean that in the market for oil, the supply curve is perfectly inelastic? Briefly explain.

During the \(1970 \mathrm{~s}\), many women changed their minds about whether they would leave the labor force after marrying and having children or whether they would be in the labor force most of their adult lives. In 1968 , the National Longitudinal Survey asked a representative sample of women aged 14 to 24 whether they expected to be in the labor force at age \(35 .\) Twenty-nine percent of white women and 59 percent of black women responded that they expected to be in the labor force at that age. In fact, when these women were 35 years old, 60 percent of those who were married and 80 percent of those who were unmarried were in the labor force. In other words, many more women ended up being in the labor force than expected to be when they were of high school and college age. What effect did this fact have on the earnings of these women? Briefly explain.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free