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Title: Is Seniority-Based Pay Used as a Motivation Device? Evidence from Plant Level Data

Author(s): Alberto Bayo-Moriones, José Enrique Galdón Sánchez and Maia Güell

Publication Date: September 2004

Keyword(s): human resource management practices, incentives, M52 and monitoring

Programme Area(s): Labour Economics

Abstract: In this Paper we use data from industrial plants to investigate if seniority-based pay is used as a motivational device for production workers. Alternatively, seniority-based pay could simply be a wage-setting rule not necessarily related to the provision of incentives. Unlike previous papers, we use a direct measure of seniority-based pay as well as measures of monitoring devices and piece-rates. We find that firms that offer seniority-based pay are less likely to offer explicit incentives. They are also less likely to invest in monitoring devices. We also find that firms that offer seniority-based pay are more likely to engage in other human resource management policies that result in long employment relationships. Overall these results suggest that seniority-based pay is indeed used as a motivation device.

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Bibliographic Reference

Bayo-Moriones, A, Galdón Sánchez, J and Güell, M. 2004. 'Is Seniority-Based Pay Used as a Motivation Device? Evidence from Plant Level Data'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4606