Keeping Jobs: Do Team Compensation Incentives Improve Working Lives?

Project Date:
Nov 1998
Award Amount:
$126,137
Project Programs:
Future of Work

DO WORKERS LIKE TEAMWORK?

 

The U.S. footwear industry is a high-profile casualty of globalization, with domestic firms losing out to low-cost foreign competitors, or, more often, relocating their manufacturing plants to overseas, labor-abundant, countries. The few remaining firms making shoes in the United States survive by catering to niche markets, keeping wages low, and constantly hunting for ways to boost productivity. There is litte scope for technological change in the footwear industry, so firms have looked to reap these productivity gains by finding new ways to organize work. One such innovation is a new compensation scheme that links pay to the performance of work teams rather than paying hourly rates or piece rates based on individual output.

 

Morris Kleiner, an economist at the University of Wisconsin received a grant for a study that will discover how these changes in methods of compensation affect the productivity, wages, and job satisfaction of low-skilled workers. His study will take advantage of an unusual "natural experiment." A shoe manufacturer Kleiner has been studying for some time is about to implement a new team-compensation scheme in one of its plants, but has agreed to keep its second, similar plant on hourly rates. Using the second plant as a control, Kleiner will identify the impact of the new compensation scheme on a range of workplace characteristics, such as pay, turnover, injury rates, and productivity. He will survey employee job satisfaction before and after the change, and register how well the new scheme works from the point of view of the owner and the workers.

 

Kleiner will write a Russell Sage monograph tracing the history of the U.S. shoe industry and applying the lessons from his experiment to other low-skill industries that are also contemplating group-based compensation.

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