Does High Involvement Management Lead to Higher Pay?

Using nationally representative survey data for Finnish employees linked to register data on their wages and work histories we find wage effects of high involvement management (HIM) practices are generally positive and significant. However, employees with better wage and work histories are more likely to enter HIM jobs. The wage premium falls substantially having accounted for employees’ work histories suggesting that existing studies’ estimates are upwardly biased due to positive selection into HIM. Results do not differ significantly when using propensity score matching as opposed to standard regression techniques. The premium rises with the number of HIM practices and differs markedly across different types of HIM practice. Key-words: wages; high involvement management; high performance work system; incentive pay; training; team working; information sharing; propensity score matching JEL-codes: J24; J31; J33; M12; M50; M52; M53; M54 This paper was produced as part of the Centre’s Labour Markets Programme. The Centre for Economic Performance is financed by the Economic and Social Research Council. Acknowledgements We thank the Finnish Work Environment Fund for funding (grant no.108294) and Statistics Finland for access to the QWLS and FLEED data. We thank participants at seminars in St. Gallen, NIESR, Lancaster, the Finnish Economic Association in Oulu and the Labour Institute for Economic Research for useful comments. Petri Böckerman is a Senior Economist at the Labour Institute for Economic Research, Helsinki, Finland. Alex Bryson is a Visiting Research Fellow with the Centre for Economic Performance, London School of Economics and Senior Research Fellow at the National Institute of Economic and Social Research. Pekka Ilmakunnas is Professor of Economics, Aalto University School of Economics, Helsinki, Finland. Published by Centre for Economic Performance London School of Economics and Political Science Houghton Street London WC2A 2AE All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior permission in writing of the publisher nor be issued to the public or circulated in any form other than that in which it is published. Requests for permission to reproduce any article or part of the Working Paper should be sent to the editor at the above address. © P Böckerman, A. Bryson and P. Ilmakunnas, submitted 2011