Does ‘Performance Pay’ Pay? Wage Flexibility over the Great Recession
نویسنده
چکیده
Using the National Compensation Survey between 2004-2014, we document substantial cyclical heterogeneity among performance pay and fixed wage jobs. We find that employment growth in performance pay (fixed wage) jobs is countercyclical (procyclical), whereas compensation per employee growth is procyclical (countercyclical). Our estimates are identified off the response of similar work levels within the same establishment to local area shocks. We provide two mechanisms: (i) procyclical (countercyclical) effort in performance pay (fixed wage) jobs, and (ii) high pay-sensitivity in performance pay jobs. Our results reconcile competing claims about the wage stickiness of new hires versus incumbents in search models.
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