Abstract
While piece rates are routinely associated with higher productivity and wages, they can also generate unanticipated effects. Using cross-country European data, we provide among the first general survey evidence of a strong link between piece rates and workplace injury. Despite controls for workplace hazards, job characteristics and worker effort, piece rates workers suffer a 5 percentage point greater likelihood of injury. This remains despite attempts to control for endogeneity and heterogeneity. As piece rate wage premium estimates rarely control for injury likelihood, this raises the specter that part of that premium reflects a compensating wage differential for risk of injury.
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Notes
See Dale-Olsen (2006) for a recent confirmation of compensating differentials for injury.
Cornellissen et al. (2011) formally model piece rate workers sorting on two dimensions.
Garen (1988) similarly emphasizes the endogeneity of injury risk arguing that those with largest earnings capacity will avoid the risk as safety is a normal good.
Alternative incentives schemes such as efficiency wages may also attract those with greater inherent productivity but remain time rates. Thus, if injury reflects effort (productivity), our comparison of injury on piece rates and on time rates may be an underestimate as it fails to control for such alternative incentive schemes.
The full list of countries are Belgium, Czech Republic, Denmark, Germany, Estonia, Greece, Spain, France, Ireland, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, Sweden, United Kingdom, Bulgaria, Croatia, Romania, Turkey, Norway, and Switzerland.
Education is not consistently measured across waves of the EWCS and as a result we do not use it as a control. In unreported but available estimates on the 2005 EWCS the inclusion of education did not substantively change the estimates of piece rates on workplace injury.
It is worth noting however that the sign and significance of all piece rate estimates presented in this paper are robust to unweighted estimation.
The large significant coefficient remained when we again limited the sample to only 2005 and included the full 58 industrial dummies.
Similar magnitudes emerge from ordered probit estimates available from the authors.
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Acknowledgements
The authors are grateful to the editor Erdal Tekin and two anonymous referees for comments on the paper. We would also like to thank participants at the 2010 Scottish Economic Society Conference, the SIRE Workshop on Workplaces and Wellbeing at the University of Dundee, the 2010 Joint Meeting of EALE and SOLE at UCL, the 2010 ESPE meetings in Essen and seminars at the economics departments at Sheffield University, Lingnan University and Northern Illinois University.
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Bender, K.A., Green, C.P. & Heywood, J.S. Piece rates and workplace injury: Does survey evidence support Adam Smith?. J Popul Econ 25, 569–590 (2012). https://doi.org/10.1007/s00148-011-0393-5
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DOI: https://doi.org/10.1007/s00148-011-0393-5