Wage policy, employee turnover and productivity

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Title: Wage policy, employee turnover and productivity
Authors: Chevalier, Arnaud
Siebert, W. S.
Viitanen, Tarja
Permanent link: http://hdl.handle.net/10197/1885
Date: 31-May-2003
Abstract: In this paper, we are interested in the effect of pay incentives on labour turnover and productivity. Particularly we use personnel data from a panel of 400 shops from a UK retail chain. The firm uses perfectly flat hourly wage system with no reward for tenure or individual productivity. This system leads to the phenomenon of negative selection, where only employees with lower outside options remain with the firm. We show that negative selection conflicts with human capital so that the relationship between employee turnover and productivity is U-shaped. If negative selection is as important as human capital accumulation in accounting for the U-shape, then devising a wage policy that will reduce negative selection could increase labour productivity considerably.
Type of material: Working Paper
Publisher: University College Dublin. Institute for the Study of Social Change (Geary Institute)
Keywords: Employee turnoverProductivity
Subject LCSH: Labor turnover
Wages and labor productivity
Retail trade--Great Britain
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers

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