Wage Incentives

At the end of this chapter, readers should be aware that:

There are numerous types of incentive that may be utilised, depending on the nature of the work environment;

Incentives will not be effective under all circumstances;

Performance will vary over the course of the working day;

The principal–agent problem is linked to problems of asymmetric information, adverse selection and moral hazard;

Whether to use time rates or piece rates depends partly on the size of monitoring costs;

The success of rank order tournaments depends on the strength of incentives to finish first or earn promotion;

Profit-sharing schemes and labour-managed firms are based on group rather than individual incentives.