Several compensation schemes

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There are several compensation schemes that employers may use to motivate workers.

A. “Pay for performance” schemes may take several forms. One is a piece rate scheme, in which there is an explicit mathematical formula that translates workers’ output into pay. (For example, a worker might be paid $5 per unit of output he or she produces.) A second scheme awards workers a year-end bonus that depends on their annual performance review. Question: All else equal, would Caucasian or African-American workers have a stronger preference for the piece rate relative to the bonus system? Why?

B. Women are more likely than men to hold jobs that pay workers a piece rate, but less likely to hold jobs that promise workers raises if they perform well. Why might that be? (Hint: This is not about discrimination.)

C. Why might it be more problematic to use a piece rate scheme to motivate a sales representative who sells computers than one who sells furniture?

D. Briefly explain how job- or industry-specific human capital (or occupational licensing, for that matter) can make employees more diligent in their jobs, even if employers do not pay efficiency wages designed to elicit greater honesty.

Reference no: EM13700871

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