International Journal of Manpower

Performance pay and fringe benefits: Work incentives or compensating wage

differentials?
Catalina Amuedo-Dorantes Traci Mach

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672
Received July 2002
Revised March 2003
Accepted May 2003

The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/0143-7720.htm

Performance pay and fringe

benefits
Work incentives or compensating wage
differentials?
Catalina Amuedo-Dorantes
Department of Economics, San Diego State University, San Diego,
California, USA, and

Traci Mach
Division of Research and Statistics, Board of Governors of the Federal
Reserve System, Washington, DC, USA
Keywords Performance related pay, Benefits, Incentive schemes
Abstract Uses longitudinal data from the NLSY79 to examine the effect of a broad variety of
performance-based pay schemes and fringe benefits on male and female wages between 1988 and
1998. Specifically, analyzes whether the offer of various performance-based pay schemes and
fringe benefits functions as an alternative work incentive, eliciting greater effort and raising wages
or, instead, it is accompanied by lower wages, as predicted by compensating wage theory. The
results indicate that, while most performance-based pay schemes are associated with higher wages
to differing extents across gender, tips are commonly accompanied by lower wages among men.
Similarly, while the offer of a retirement plan appears to as a work incentive raising male and
female wages, workers are willing to trade wages for jobs offering life and medical insurance.

Introduction and background

With the growth of ever more complex compensation packages over the last
three decades, the design and evaluation of performance-based compensation
contracts have captured the attention of economists[1]. Theoretical
developments based on agency theory have demonstrated the advantages of
adopting a performance-based pay system in order to attract superior
employees and induce greater effort from the existing workforce (e.g. Gibbons,
1998). Because increased productivity should be compensated with higher
earnings, a natural way to gauge the effectiveness of implemented
performance-based pay programs is through earned wages (Booth and
Frank, 1999). As such, numerous studies have provided empirical evidence of
the impact of performance-based pay schemes on workers earnings. These
empirical analyses have either focused on specific types of performance-based
International Journal of Manpower
Vol. 24 No. 6, 2003
pp. 672-698
q MCB UP Limited
0143-7720
DOI 10.1108/01437720310496157

The authors are thankful to Cynthia Bansak, Nancy Burnett, Nels Eikenhout, Susan Pozo,
Ricardo Serrano-Padial and participants at the Western Economic Association meetings for
helpful comments and suggestions. The opinions expressed are those of the authors and do not
necessarily reflect the views of the board of governors or other members of its staff.

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compensation, such as piece rates, bonuses, promotion-based incentives or Performance pay

profit-sharing plans[2], on specific groups of individuals or occupations, such
and fringe
as men and CEOs[3], or on establishment and firm level data, with the latter
benefits
frequently limited to specific firms or sectors in the economy[4]. In general, the
empirical research has found a positive relationship between performancebased pay and earnings.
673
Recognizing the complex nature of compensation packages, this study
adds to the existing literature with an analysis of the impact that a
broader variety of pay schemes piece rates, commissions, tips, bonuses,
stock options and others, and fringe benefits offered by employers,
including health, life and dental insurance, retirement plans, maternity
leave, or childcare provision have had on male and female wages
across a variety of industries and occupations during most of the past
decade. We rely on self-reported employee level data from the NLSY79,
which ran from 1988 to 1998. The analysis differs from previous studies
in three ways. First, given the percentage of employees receiving multiple
types of performance-based pay incentives, we control for and analyze all
types of performance-based pay schemes, rather than focusing on a few
types[5]. Controlling for all types of performance-based compensation
received by the worker is of particular interest because failure to do so
could result in an upward bias of the estimated effect of the specific
performance-based pay scheme being examined if the worker values other
received and omitted performance- based incentives.
Second, unlike previous research, we also include a rich set of fringe benefits
offered to the employee possibly increasing her utility and affecting her wages.
If employees are willing to accept lower wages in exchange for a job offering
certain fringe benefits, as argued by the compensating wage theory (e.g. Eberts
and Stone, 1985; Rosen, 1986; Olson, 2002), the omission of information
regarding their employers offer of these fringe benefits may induce downward
bias on the estimated impact of performance-based pay schemes. On the other
hand, estimates could be upwardly biased if there is higher utility associated
with being offered certain fringe benefits, leading to increased work effort,
productivity, and wages, as argued by Shapiro and Stiglitz (1984).
Furthermore, the coefficients on fringe benefits will also enable us to sort out
which of the aforementioned theories prevails empirically with respect to the
wage effect of being offered a variety of fringe benefits. Specifically, negative
coefficients on fringe benefits would support their role as compensating wage
differentials, inducing the worker to accept a lower wage in exchange for a job
offering a particularly valued fringe benefit. Alternatively, positive coefficients
on fringe benefits would favor the view of fringe benefits as work incentives to
the extent that they induce greater work effort on the part of workers in order to
keep a job they value given its offered fringe benefits.

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674

Finally, we carry out the analysis first grouping across gender and then
comparing our results to those from wage regressions by gender[6]. All
regressions correct for sample selection bias incurred when focusing on
working individuals[7]. The analysis by gender allows for differences in the
wage distributions of men and women as well as for differences in their
preferences, which is desirable in this context for at least two reasons. First, it
is well documented that mens and womens wage distributions differ
(Gunderson, 1989)[8]. Differences in the wage distributions may mask the true
impact of these incentives if men and women are grouped in the analysis.
Second, men and women may place different value on different aspects of
compensation packages. For example, if men and women differ in their
preferences (Hersch, 1996; Hinz et al., 1997; Jianakoplos and Bernasek, 1998),
different types of work incentives, such as the employer provision of childcare,
may have a different effect on wages across gender.
We find that piece rates and commissions each raises male wages by a factor
of 4 percent to 5 percent, while tips are accompanied by significantly lower
wages. The differential effect of tips on wages reflects the lower wages (up to
11 percent lower) men are willing to accept in exchange for tips. In this respect,
tips act as a compensating wage differential rather than as a work incentive.
Among women, piece rates, bonuses, and other performance-based pay
schemes raise female wages between 1 percent and 4 percent each. These
estimates are smaller than those obtained in previous studies using the
NLSY79[9]. As previously noted, this difference may be partially due to the
different scope of these studies. In particular, we focus on the entire range of
performance-based pay schemes received by the worker to avoid upward
biases in the estimated effect of a particular type of performance pay being
examined in the event the respondent derives any utility from other
simultaneously received and, yet, omitted performance-based compensation
schemes.
Additionally, as predicted by compensating wage theory, we find that wages
are traded in exchange for jobs offering insurance for both men and women.
However, we also observe that the offer of other fringe benefits, such as
retirement benefits, is associated with higher, rather than lower, male and
female wages. In these instances, the offer of retirement benefits seems to
function as an alternative work incentive, possibly eliciting greater job
attachment, work effort, and even more investment in firm-specific human
capital, all of which would result in higher wages[10].
Finally, we find that the wage effects of both performance-based pay
schemes and fringe benefits differs by gender, illustrating the different value
that men and women place on various aspects of their compensation packages.
In particular, male wages are more responsive to both commissions and tips
than female wages, while female wages appear more responsive to bonuses
than male wages. To the extent that commissions and tips are based largely on

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the interaction with customers, as opposed bonuses which are more Performance pay
employer-controlled and may therefore be more consistently determined, the
and fringe
observed gender differences may be a reflection of male and female differences
benefits
in risk preferences or willingness to bear greater pay uncertainty (Hersch, 1996;
Jianakoplos and Bernasek, 1998; Geddes and Heywood, forthcoming).
Understanding the different gender responses to various compensation
675
packages may prove useful in retaining workers in the predominantly
single-sex occupations currently experiencing high turnover rates, such as
registered nursing, childcare provision, and teaching.

Data and descriptive evidence on performance-based pay and fringe

benefits
The data
We use data from the National Longitudinal Survey of Youth (NLSY79). Since
1979, a vast amount of information on the labor market participation of a
representative sample of 12,686 individuals has been collected[11]. Aside from
personal and work related characteristics of each job held by the respondent,
the NLSY79 asked respondents on five separate occasions (1988, 1989, 1990,
1996, and 1998) if the earnings of their current job were based all or in part on
job performance[12]. Respondents who responded positively were
subsequently asked about the type of performance-based pay scheme they
received: piece rate, commissions, bonuses (based on job performance), stock
options, tips, or some any other type[13]. In addition, the survey collected
information on whether the respondent was offered any of the following fringe
benefits for each job held: health, life, and dental insurance, maternity leave,
retirement plans, profit sharing, training, and childcare provision[14]. It is
worth noting that the information collected by the NLSY79 refers to whether or
not the employer offers a particular set of fringe benefits, independently of
whether or not the respondent ultimately takes the fringe benefits being
offered. To the extent that performance-based pay schemes and fringe benefits
are typically implemented and offered by the employer to a broad group of
workers at the firm or establishment level, the dummy variables indicative of
whether the respondent receives a particular performance-based pay scheme
or/and is offered a particular fringe benefit can be thought of as job level
variables.
Our dependent variable is the log of real hourly wages. The NLSY79
provides the hourly rate of pay, excluding any additional compensation in the
form of commissions, bonuses, stock options, or tips. We deflate hourly wages
using the CPI index and restrict our sample to individuals reporting hourly
earnings between $1.00 and $100.00[15]. Table AI in the Appendix contains a
detailed description of the variables used in the analysis, along with their
means and standard deviations.

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676

Figure 1.
Percentage of
respondents receiving a
particular type of
performance-based pay
scheme over time: at
least one type incentive
pay received

Figure 2.
Percentage of
respondents receiving a
particular type of
performance-based pay
scheme over time: piece
rates received

Figure 3.
Percentage of
respondents receiving a
particular type of
performance-based pay
scheme over time:
commissions received

Gender differences in the receipt of performance-based pay and fringe benefits

In order to familiarize ourselves with the data, Figures 1-7 depict the different
male and female participation rates in a variety of performance-based incentive
pay schemes over the decade 1988-1998. As evidenced by the figures, there are
gender differences in the type of performance-based pay scheme received.
Figure 1 indicates that a higher percentage of men than women received at
least one type of performance-based incentive. A similar pattern is observed

when we distinguish by type of performance-based pay scheme in Figures 2-7, Performance pay
with the exception of tips. Overall, bonuses and commissions were the most
and fringe
frequent types of performance-based pay schemes for both men and women
benefits
over the decade. Additionally, the prevalence of piece rates, commission, tips
and other types of performance-based incentives has decreased as respondents

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677

Figure 4.
Percentage of
respondents receiving a
particular type of
performance-based pay
scheme over time:
bonuses received

Figure 5.
Percentage of
respondents receiving a
particular type of
performance-based pay
scheme over time: stock
options received

Figure 6.
Percentage of
respondents receiving a
particular type of
performance-based pay
scheme over time: tips
received

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678

Figure 7.
Percentage of
respondents receiving a
particular type of
performance-based pay
scheme over time: other
incentives received

Figure 8.
Percentage of
respondents offered a
particular type of job
benefit over time: health
insurance benefits

aged, while that of stock options rose for both men and women. Finally, while
most performance-based compensation contracts moved in tandem for men and
women over the period under consideration, bonuses began moving slightly in
opposite directions for men and women in the second half of the 1990s,
becoming increasingly prevalent among men while diminishing somewhat
among women.
Similarly, Figures 8-15 depict the percentage of men and women being
offered different types of fringe benefits over the period 1988-1998. Health
insurance, life insurance, retirement plans, dental insurance, and maternity
leave for women were the most frequently offered types of fringe benefits over
the course of the decade. Of all the fringe benefits being offered, the offer of
retirement plans, dental insurance, and maternity leave for men displayed the
largest growth in percentage terms. Overall, most fringe benefits were offered
to similar percentages of men and women, with the notable exception of
maternity leave.

Performance pay
and fringe
benefits

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679

Figure 9.
Percentage of
respondents offered a
particular type of job
benefit over time:
retirement plan

Figure 10.
Percentage of
respondents offered a
particular type of job
benefit over time: child
care

As discussed earlier, controlling for the receipt of multiple performance-based

pay schemes may be particularly important in evaluating the effect of a
particular type of performance-based incentive. If a large percentage of
individuals in the sample receive multiple types of performance-based pay,
omission of their complete set of incentives may significantly bias the effect of
a particular type of performance-based pay scheme being examined. In order to
assess whether this is the case, each cell of Table I reflects the percentage of
individuals receiving a particular type of performance-based pay indicated by
the row, conditional on receiving the incentive indicated by the column. For
instance, column 4 shows that of all men who received bonuses, 3 percent also

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680

Figure 11.
Percentage of
respondents offered a
particular type of job
benefit over time: life
insurance benefits

Figure 12.
Percentage of
respondents offered a
particular type of job
benefit over time:
maternity benefits

received piece rates, 13 percent received commissions, 10 percent received stock

options, and so forth. Overall, the figures reveal that many individuals received
multiple types of performance-based pay schemes simultaneously. Similarly,
Table II shows the percentage of males and females who were offered some
type of job benefit indicated by the row, conditional on having been offered the
fringe benefit indicated by the column. As with performance-based pay
schemes in Table I, most employees who were offered a fringe benefit were
typically offered more than one. Due to this overlap, exclusively examining a
few types of performance-based pay schemes or fringe benefits may introduce
systematic biases into their coefficient estimates.
Additionally, Table III displays some preliminary evidence on the potential
wage effects of different types of performance-based pay schemes for men and
women. For both men and women, mean wages were lower in jobs offering
piece rates and tips than the sample average wage. The opposite was true of

Performance pay
and fringe
benefits

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681

Figure 13.
Percentage of
respondents offered a
particular type of job
benefit over time:
training

Figure 14.
Percentage of
respondents offered a
particular type of job
benefit over time: dental
insurance

Figure 15.
Percentage of
respondents offered a
particular type of job
benefit over time: profit
sharing

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682

Table I.
Percentage of men and
women receiving
various work incentives
by type of work
incentive in columns

Piece
rate (%)

Commission (%)

Bonus (%)

Stock
options (%)

Tips (%)

Other (%)

Men
Piece rate
Commission
Bonuses
Stock options
Tips
Other

100.0
8.1
12.7
2.4
3.9
2.5

4.3
100.0
31.0
4.4
5.3
3.0

2.9
13.4
100.0
9.6
3.2
2.4

3.7
13.3
66.5
100.0
2.1
2.7

6.4
16.6
23.2
2.2
100.0
3.0

3.0
6.8
12.5
2.0
2.2
100.0

Women
Piece rate
Commission
Bonuses
Stock options
Tips
Other

100.0
3.8
7.8
1.8
5.5
1.8

2.6
100.0
29.8
2.4
11.6
3.1

1.9
10.7
100.0
6.8
2.3
1.9

4.2
8.3
66.7
100.0
1.8
3.0

3.9
12.2
6.6
0.5
100.0
2.3

2.1
5.4
9.7
1.5
3.9
100.0

jobs offering commissions, bonuses, stock options, or other types of

performance-based compensation. The higher average wages associated with
the receipt of commissions, bonuses, stock options, and other
performance-based pay schemes may be interpreted as a sign of the
effectiveness of these performance-based compensation schemes in eliciting
high performance. Alternatively, this finding may be linked to more able
workers self-selecting into performance-based jobs or to specific characteristics
of the jobs held by these workers, e.g. good management or work environment,
suggesting the need to control for individual and job specific heterogeneity
through fixed-effects estimation (Lazear, 1986).
Columns 2-6 of Table III further break down average wages by the types of
fringe benefits offered to the employee. In general, examining the first row of
cells in columns 1-6, we observe that the average wage in jobs offering at least
one type of job benefit was higher than the sample average wage. The increase
was particularly important in the case of less frequently offered fringe benefits,
such as child care, training, and profit sharing, all of which were typically
associated with greater average hourly wages than the remaining fringe
benefits. The aforementioned evidence suggests, once more, that offering fringe
benefits may promote greater work effort, which, in turn, may be compensated
with higher wages. Alternatively, as pointed out for performance-based pay
schemes, the positive association between real wages and the offer of specific
fringe benefits may be due to the self-selection of more able workers into jobs
offering better fringe benefit packages or to specific characteristics of the jobs
held by these workers. The latter reinforcing, once more, the importance of
accounting for unobserved individual and job heterogeneity potentially
responsible for the higher wages being observed.

Women
Health
insurance
Life insurance
Maternity leave
Dental
insurance
Retirement
benefits
Profit sharing
Training
Child care

Men
Health
insurance
Life insurance
Maternity leave
Dental
insurance
Retirement
benefits
Profit sharing
Training
Child care
98.0
100.0
69.5
76.0
80.6
38.2
61.5
8.2

97.9
100.0
93.2
78.5
82.4
36.7
67.0
9.9

100.0
83.3
65.2
71.5
74.2
35.0
56.5
7.0

100.0
84.9
91.5
75.0
76.6
34.1
62.5
9.1

Health
Life insurance
insurance (%)
(%)

75.1
34.1
62.3
9.4

71.8

90.7
80.7
100.0

80.1
38.3
63.2
9.4

76.2

94.6
85.0
100.0

Maternity
leave (%)

83.2
36.8
68.8
10.8

100.0

97.9
88.7
93.8

84.1
38.5
64.4
9.1

100.0

98.4
88.7
72.4

Dental
insurance (%)

100.0
39.4
70.5
10.8

80.2

96.1
89.9
93.9

100.0
41.4
65.8
8.9

80.1

97.3
89.6
72.2

Retirement
benefits (%)

85.8
100.0
71.2
11.6

77.5

94.2
87.5
93.8

84.5
100.0
67.7
10.5

75.2

94.3
86.7
70.9

82.2
37.9
100.0
12.6

77.8

92.6
85.5
92.0

83.9
42.2
100.0
10.9

78.7

95.5
87.5
72.9

82.8
41.3
82.9
100.0

80.7

89.4
83.6
92.1

91.8
53.2
87.1
100.0

90.2

97.3
94.2
84.6

Profit sharing
(%)
Training (%) Child care (%)

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Performance pay
and fringe
benefits
683

Table II.
Percentage of men and
women offered various
types of fringe benefits
pay by type of job
benefit in columns

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Men
Sample

684

Piece rate
Commission

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Bonus
Stock Options
Tips
Other
Women
Sample
Piece rate
Commission
Bonus
Stock Options
Tips
Table III.
Average wages by
incentive type and
fringe benefits

Other

Sample

Insurance

Retirement

Profit Sharing

Training

Child care

12.983
(8.474)
12.695
(9.040)
14.923
(9.962)
15.692
(10.491)
20.777
(13.817)
9.745
(5.773)
15.452
(11.019)

13.595
(8.093)
13.053
(9.628)
15.432
(9.775)
16.251
(10.514)
21.028
(13.875)
10.372
(5.663)
15.843
(10.354)

14.669
(8.268)
13.876
(10.637)
16.781
(10.693)
17.573
(10.849)
21.446
(13.954)
11.793
(6.363)
16.86
(10.439)

14.557
(9.068)
13.412
(9.735)
16.273
(11.363)
16.993
(10.943)
19.112
(12.065)
10.887
(6.697)
17.014
(11.370)

15.278
(8.571)
14.434
(10.021)
16.67
(10.324)
18.008
(10.883)
22.729
(13.615)
11.638
(6.971)
17.653
(10.932)

15.555
(8.545)
10.666
(3.355)
17.238
(10.206)
19.62
(12.603)
22.142
(14.404)
13.105
(9.908)
19.328
(12.836)

10.528
(6.698)
9.137
(6.709)
12.211
(9.238)
12.441
(7.755)
15.465
(10.876)
8.082
(5.636)
11.745
(7.417)

11.088
(6.136)
8.416
(4.836)
12.579
(9.069)
12.573
(7.489)
15.534
(10.875)
8.186
(6.049)
12.331
(7.101)

11.92
(6.203)
9.453
(5.720)
13.474
(8.865)
13.544
(7.884)
15.841
(11.369)
7.407
(3.218)
13.016
(6.945)

11.485
(6.374)
9.78
(6.312)
13.342
(9.935)
13.623
(8.343)
14.904
(11.623)
8.373
(4.332)
12.941
(6.418)

12.109
(6.276)
10.643
(6.354)
13.569
(10.107)
13.529
(7.733)
15.734
(9.915)
7.958
(3.808)
13.048
(7.296)

11.841
(6.414)
13.082
(10.635)
15.771
(10.291)
13.576
(8.051)
14.629
(9.472)
6.012
(3.494)
13.943
(11.676)

Note: Standard deviation shown in parentheses

In sum, the descriptive evidence in Tables I-III signals the need to control for
multiple work incentives, individual, and job characteristics in order to
appropriately sort out the effects of the traditional performance-based pay
schemes and fringe benefits on wages. Furthermore, the differential incidence
of each type of performance-based incentive by gender revealed by Figures 1-7,
as well as mens and womens different degrees of labor force attachment,
underline the need to run the analyses separately for men and women.
Empirical methodology
Performance-based pay schemes are implemented by the firm in order to
induce greater effort from their existing workforce (e.g. Gibbons, 1998). As their
name indicates, these pay schemes promote workers productivity by
compensating workers according to their work performance. To the extent

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that fringe benefits may elicit improved work performance and productivity on Performance pay
the part of the worker, they may also function as an alternative type of work
and fringe
incentive. Nonetheless, while still promoting work effort, because fringe
benefits
benefits are not typically offered based on the workers performance at the firm,
they are only expected to induce the minimum level of effort required to keep a
desirable job (Shapiro and Stiglitz, 1984) or to persuade workers to accept or
685
stay at a particular job.
Conversely, workers may be willing to accept lower wages in exchange for a
job offering highly valued performance-based compensation contracts or
fringe benefits, as predicted by compensating wage theory. In the case of
performance-based contracts, workers may be willing to accept a pay scheme
that involves a higher volatility in earnings, such as a piece rate, in exchange
for a higher rate of pay (Sciler, 1984; Parent, 1999).
In order to decipher whether performance-based pay schemes and fringe
benefits function as work incentives or, rather, as compensating wage
differentials, we examine their effect on wages earned by men and women over
the past decade[16]. Following Heckman (1976) and Wooldridge (1995), we first
correct for the sample selection biases resulting from focusing on a sample of
working individuals in each given year by including the inverse Mills ratio in
our structural wage regression as follows[17]:
ln wijt X ijt b PBPjt d FBjt g 0 lijt x hijt ; with : hijt aij 1ijt ;

where wijt represents the hourly wage for the ith individual in job j in year t, Xijt
is a vector of personal and job related characteristics such as age, race, and
experience and tenure, industry, occupation, and union status, PBPjt is a vector
of job level dummies indicative of whether job j offers a particular set of
performance-based pay schemes, FBjt is a vector of job level dichotomous
variables indicative of whether job j offers a particular set of fringe benefits[18],
lijt is the inverse Mills ratio, aij represents individual and job-specific fixed
effect[19], and 1ijt is an independently and identically distributed error term.
As previously mentioned, one issue that arises when examining the impact
of performance-based pay schemes and fringe benefits on wages is the
potential nonrandom assignment of workers into jobs offering certain types of
incentive pay or fringe benefits. For instance, if highly motivated workers in
jobs offering a cooperative work atmosphere are more likely to be offered
performance-based pay schemes or/and fringe benefits, failure to control for
these individual-job fixed effects would result in upward biased estimates of
the relative return to employment in jobs offering these types of work
incentives. Panel data techniques may be used to deal with this problem[20]. In
particular, individual-job-specific fixed effects are likely to capture fairly well
most unobserved differences between workers in jobs offering a particular type
of performance-based incentive and/or fringe benefit and workers in jobs that
do not given the relatively short duration of our panel. Assuming that the
individual-job-specific fixed effect is the only remaining component of the error

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686

term correlated with the different performance-based pay schemes and fringe
benefits, purging the model of this term should provide us with unbiased
coefficient estimates. Therefore, we estimate equation (1) using fixed effects to
account for any unobserved individual job characteristics correlated with
workers self-selection into particular types of jobs. As a result, d and g should
only capture wage fluctuations due to the higher (or lower) utility associated
with being paid according to a particular performance-based pay scheme as
well as with receiving a given set of fringe benefits, and not due to unobserved
individual or job characteristics.
Finally, we correct the variance-covariance matrix to account for the
heteroscedasticity, the additional source of variation in the compound
disturbance, and the correlation across observations introduced by the inverse
Mills ratio when statistically significant following Greene (1981) and Murphy
and Topel (1985).
Wage effects of performance-based pay schemes and fringe benefits
by gender
Estimation results for the combined sample of men and women, as well as
separately by gender, are shown in Table IV. The first column in Table IV
shows the estimated results when men and women are combined, as has been
done in much of the previous literature on the impact of performance-based
incentive pay until very recently[21]. The estimates indicate that piece rates
and bonuses function as work incentives, increasing wages by 5 percent and 2
percent, respectively. As previously argued, it is also possible that the higher
wage rate associated with piece rates functions as a compensating wage
differential for the higher pay variability to which piece rate workers are
subjected to (Sciler, 1984; Parent, 1999). Tips, however, are accompanied by up
to 6 percent lower wages, reflecting workers willingness to accept a lower
wage as long as they are able to add to it at a fairly predictable rate, as is often
the case with tips. A similar result is found for insurance[22]. In particular, the
negative coefficient on insurance reflects the lower wage that workers are
willing to accept in exchange for a job offering insurance coverage, as predicted
by compensating wage theory. However, retirement boosts workers wages by
about 3 percent, signaling its potential as an alternative work incentive,
whether it works indirectly increasing workers commitment to their employers
and their investment in productivity enhancing firm-specific human
capital[23], or directly through workers increased work effort.
By estimating the wage regressions separately by gender, we are able to
observe how the effect of performance-based incentives on male wages appears
to be generally understated in the combined model. While the bias is minimal
for piece rates, which continue to raise male wages by approximately 5 percent,
it is larger when referred to the wage effect of commissions and tips. In
particular, commissions now seem to boost male wages by approximately 4
percent while tips are accompanied by up to 11 percent lower wages; that is, a

Dependent variables
Piece rate
Commission
Bonus
Stock options

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Tips
Other incentives
Insurance
Retirement
Profit sharing
Training
Childcare
Lambda

All
0.0472***
(0.0183)
0.0257
(0.0183)
0.0151*
(0.0086)
0.0280
(0.0201)
2 0.0583**
(0.0267)
0.0116
(0.0169)
2 0.0316***
(0.0123)
0.0258***
(0.0094)
2 0.0002
(0.0083)
0.0028
(0.0076)
0.0067
(0.0121)
0.1515
(0.0973)

Men
0.0504**
(0.0240)
0.0412*
(0.0235)
0.0157
(0.0120)
0.0299
(0.0258)
20.1108***
(0.0377)
20.0047
(0.0231)
20.0498***
(0.0176)
0.0400***
(0.0141)
20.0108
(0.0119)
0.0006
(0.0112)
0.0182
(0.0183)
20.068
(0.1339)

Women
0.0408***
(0.0136)
20.0077
(0.0113)
0.0160**
(0.0071)
0.022
(0.0206)
0.0099
(0.0119)
0.0382***
(0.0150)
20.0092*
(0.0064)
0.0117**
(0.0059)
0.0127
(0.0117)
0.0051
(0.0053)
20.0073
(0.0085)
0.1381***
(0.0408)

Number of obs.
26,203
13,817
12,386
Number of groups
15,989
8,372
7,617
Regression F-stat
66.33
32.20
36.79
R-squared
Within
0.215
0.200
0.246
Between
0.104
0.153
0.093
Overall
0.112
0.164
0.108
Notes: All models include the following controls: firm size, tenure, tenure squared, occupational
experience, industry experience, industry, occupation, union status, work shift, age, race,
immigrant status, marital status, number of kids, education, AFQT score, urban status,
unemployment rate and year dummies. Insurance is a dummy indicating receipt of health
insurance, dental insurance, life insurance, or maternity leave. Robust standard errors are shown
in parentheses. * Indicates significance at the 10 percent level; ** indicates significance at the 5
percent level; and *** indicates significance as the 1 percent level

difference of over 1.5 and 5 percentage points with respect to the combined
model in each case. The observed trade-off between wages and tips is also
observed for some fringe benefits. In particular, men are willing to accept
5 percent lower wages in exchange for a job offering insurance. However, the
offer of a retirement plan functions as a work incentive, raising male wages by
approximately 4 percent. In that respect, the employers offer of a retirement
plan appears to be as economically important as commissions in eliciting work

Performance pay
and fringe
benefits
687

Table IV.
Worker and job fixed
effects wage equations

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688

effort and raising wages, with both increasing male hourly wages by
approximately 52 cents[24].
Among women, bonuses continue to raise female wages by approximately
2 percent, while the effect of piece rates in boosting female wages drops
from 5 percent to about 4 percent when estimating the wage regressions
separately by gender. At any rate, aside from the new statistical significance of
other non-specified performance-based pay schemes, the largest difference
between the results in the combined model and those from the female wage
regression is in the estimated wage effect of tips. While the combined model
predicts an average wage trade-off of approximately 6 percent in exchange for
tips, we now find that tips do not significantly alter female wages. That is,
women are not willing to accept a lower wage rate as a trade-off for the
possibility of higher income with tips, as appears to be the case with men. This
result points towards gender differences in workers preferences, such as
differences in the willingness to bear greater pay variability as is often the
case with performance-based incentives originating from the interaction with
customers. Finally, the offer of insurance is accompanied by approximately 1
percent lower wages, revealing womens willingness to trade wages in
exchange for a job offering this fringe benefit. However, as in the case of men,
the offer of a retirement plan raises female wages by approximately 1 percent,
underscoring, once more, the potential role of this fringe benefit in eliciting
work effort resulting in higher wages.
Some of the fringe benefits are not significant in any of the specifications. A
natural question is whether these benefits do not affect wages or whether there
is something causing them to be insignificant. Evidence from the 1972 Quality
of Employment Survey suggests that a large portion of employees who are
offered insurance and retirement plans choose to participate, with over 90
percent of men and 80 percent of women participating. However, participation
in training programs, profit sharing plans and stock option plans is
significantly lower for both men and women. While these data are quite old,
they do give some indication of the benefits that respondents may be least
likely to take up. It could be the lack of information on participation that causes
training, profit sharing and stock options to be insignificant in the regressions.
To address this more fully, better data would be needed.
Summary and conclusions
In this paper, we use longitudinal data from the NLSY79 to examine the effect
that a broad variety of work incentives, including multiple performance-based
pay schemes and fringe benefits, have had on male and female wages between
1988 and 1998. We estimate wage regressions grouping both genders and
compare our results to those from wage regressions by gender. Several findings
are worth summarizing. First, most traditional performance-based pay
schemes appear to be effective in eliciting higher productivity (as captured
by higher wages) to differing degrees, with the exception of tips among men.

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The possibility exists that the higher wages associated with some of these Performance pay
performance-based pay schemes, such as piece rates, may be functioning as a
and fringe
compensating wage differential for the higher earnings uncertainty that often
benefits
accompanies these compensation packages (Sciler, 1984; Parent, 1999). In any
event, we find that piece rates and commissions raise male wages by 5 percent
and 4 percent, respectively, while tips are accompanied by approximately 11
689
percent lower wages, reflecting mens willingness to accept a lower wage as
long as they are able to add to their pay at a fairly predictable rate, as is often
the case with tips. This is not the case among women, for whom piece rates,
bonuses, and other performance-based pay schemes boost wages by a factor of
1 percent to 4 percent. The magnitude of these estimates is smaller than that of
previous estimates obtained using the NLSY79, possibly due to the different
scope of the studies. In particular, we control for all types of performance-based
pay schemes received by the worker with the purpose of avoiding upward
biases in the estimated wage effect of a specific performance-based pay scheme
being examined resulting from the omission of other simultaneously received
performance-based compensation contributing to the workers utility.
Second, we find that, as predicted by compensating wage theory, wages are
often traded in exchange for a job offering certain fringe benefits, including
insurance for both men and women. These observed trade-offs might be
reinforced by the opportunity of forgoing insurance coverage for a higher pay
rate, as with the Flex Cash option offered by some employers[25]. This is not
typically a possibility with retirement plans, which, in turn, appear to be
accompanied by higher wages for both men and women. One explanation as for
why the offer of retirement plans appears to be associated with higher wages
might be linked to the more limited portability of some retirement plans from
employer to employer. In those instances, if workers value retirement plans,
these may operate as a work incentive inducing greater employee work
commitment and effort so as to guarantee a long-run relationship with the firm,
as pointed out by Shapiro and Stiglitz (1984). In a similar vein, Azfar and
Danninger (2001) argue that retirement packages may provide workers with an
incentive to invest more heavily in firm-specific human capital, increasing their
productivity and wages.
Finally, we find that the wage effects of both performance-based pay
schemes and fringe benefits differs by gender, illustrating the different value
that men and women place on various aspects of their compensation packages.
In particular, male wages are more responsive to both commissions and tips
than female wages, while female wages appear more responsive to bonuses
than male wages. These gender differences may be partially explained by the
characteristics of these types of performance-based compensation contracts.
Commissions and tips are pay schemes based on individual job performance
often observed in sales and service-oriented jobs, therefore, highly dependent
on the employee interaction with clients. To the extent that the outcome of this
interaction with clients is not easily foreseeable by the employee, commissions

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690

and tips have the potential of being more volatile and irregular than other
performance-based incentives originating from the employees individual
performance. The greater responsiveness of male wages to both commissions
and tips than female wages, as well as that of female wages to bonuses, may be
explained by gender differences in risk preferences or willingness to bear
greater pay variability (Hersch, 1996; Jianakoplos and Bernasek, 1998; Geddes
and Heywood, forthcoming). Future research examining mens and womens
responses to various performance-based compensation contracts
characteristics such as their dependability, is needed to further our
understanding of the reasons behind the differential effectiveness of
performance-based pay incentive schemes by gender.
Policy-wise, far from advocating a differential discriminatory treatment of
men and women in the workplace, our findings provide useful information with
respect to the design of compensation packages that would best promote worker
productivity and retain qualified workers, as can be done by appropriate work
incentives and compensating wage differentials, respectively. This may be
particularly important in predominantly single-sex occupations with high
turnover rates, such as registered nursing, childcare providers, and teachers.
Finally, it is important to point out some of the limitations of our analysis
and provide suggestions for future studies. In particular, it would be of interest
to examine the reasons behind the differential effect of offering various
performance-based pay schemes and fringe benefits on male and female wages
revealed in this paper; specifically, the role played by gender differences in risk
preferences. Additionally, the use of richer data providing information not only
on the availability but, also, on the size (relative to the wage) and the
participation in the various types of performance-based pay schemes being
paid and the generosity of the different fringe benefits being offered, would be
highly valuable. Finally, our results are specific to the USA over the 1988-1998
decade. It would be very interesting for future research to determine whether
the found gender differences in the value placed on a variety of
performance-based pay schemes and fringe benefits being offered differ
across countries and over time.
Notes
1. See Jensen and Murphy (1990), Brown (1990), and Booth and Frank (1999).
2. For instance, Booth and Frank (1999), McCue (1996), and Parent (1999).
3. Some examples are Abowd (1990), Jensen and Murphy (1990), and Parent (1999).
4. A vast literature can be found in this category, such as Lazear (2000) and Hubbard and Palia
(1995).
5. For instance, also using the 1979 National Longitudinal Survey of Youth (NLSY79), Ewing
(1996) examines the combined wage effect of piece rates, tips and stock options, as well as the
individual wage effects of bonuses and commissions, on a grouped sample of men and
women. Separating men and women, Parent (1999) also relies on NLSY79 data to examine
the effect of piece rates and bonuses on male and female hourly wages.

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6. Alternatively, the model could be estimated interacting gender with each of the variables. As
this would use up considerable degrees of freedom, the regressions are run separately by gender.
7. While others have estimated results separately by gender (e.g. Parent, 1999), there has been
no control for sample selection. While the sample selection term is significant for women, it
does not appreciably alter the estimates of the impact of the various types of work
incentives. Estimates with and without the correction are available from the authors upon
request.
8. Wage distributions for men and women differ considerably due to differences in their labor
force attachment, human capital accumulation, and possible discrimination, among other factors.
9. In particular, Parent (1999) finds that piece rates increase male wages by approximately
7 percent, while Ewing (1996) finds that commissions and bonuses raise wages for the
combined sample of men and women by 9 percent and 4 percent respectively.
10. See Azfar and Danninger (2001) for a similar argument when examining employment
relationship hazard rates.
11. Respondents were interviewed yearly between 1979 and 1994. Beginning with the 1994
interview, interviews are only scheduled to take place biennially.
12. In 1988, 1989, and 1990 this question was asked of the current or most recent job. In the 1996
and 1998 interviews this was asked of all jobs held since the last interview. In order to make
the observations comparable across years, information on the current or most recent job was
used in all years.
13. A detailed description of this survey question is contained in the Appendix.
14. As with performance-based incentives, we used fringe benefit information for the current or
most recent job.
15. The latter was retrieved from www.bls.gov/cpi/home.htm using the year 1996 as the base year.
16. For a literature review on the theoretical relevance of incentive pay, see Gibbons (1998).
17. Following Wooldridge (1995), we estimate selection equations for whether the individual
works or not for each time period or year in the sample. The selection equations include age,
race, years of education, AFQT scores, marital status, presence of young kids in the
household, total number of kids, region of residence, and the unemployment rate as
regressors. In addition to the functional form, the inclusion of young kids and individual
specific and time invariant regressors (such as gender, race, immigrant status, and AFQT
scores) that drop from the fixed-effects estimation of the panel wage regressions help us
identify the selections equations. The predictions from the selection equations are used to
construct the inverse Mills ratio included in equation (1). Results from the selection
regressions for each year and gender are available in Tables AII-AIV in the Appendix.
18. As previously mentioned, the dummy variables on the receipt of a particular
performance-based pay scheme and/or the offer of a particular fringe benefit can be
thought of as job level variables to the extent that performance-based pay schemes and fringe
benefits are typically implemented and offered by the employer to a broad group of workers.
19. These are dummies for each individual job pair in our sample. Every time a respondent
changes jobs, a new dummy variable is created to capture unobserved individual job
characteristics of the new pair.
20. See Wooldridge (1995).
21. For example, see Ewing (1996), Brown (1990), and Drago (1991).
22. In order to avoid potential collinearity problems, we created a dummy variable to indicate
the receipt of health insurance, dental insurance, life insurance or maternity leave as these
variables were highly correlated.

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23. A similar argument is pursued in relation to the employment relationship hazard rate in
Azfar and Danninger (2001).
24. These values are obtained by taking the percentage of the average male wage displayed in
Table III.
25. Flex Cash is a cash amount that may be added to an employees pay if he/she shows
medical and/or dental plan coverage through a source other than the current employer and
waive plan enrollment with the current employer. The Flex Cash payment is treated as
taxable income and is subject to payroll taxes.
References
Abowd, J.M. (1990), Does performance-based managerial compensation affect corporate
performance?, Industrial and Labor Relations Review, Vol. 43, special issue, pp. 52S-72S.
Azfar, O. and Danninger, S. (2001), Profit sharing, employment stability, and wage growth,
Industrial and Labor Relations Review, Vol. 54 No. 3, pp. 619-30.
Booth, A.L. and Frank, J. (1999), Earnings, productivity, and performance-related pay, Journal
of Labor Economics, Vol. 17, pp. 447-63.
Brown, C. (1990), Firms choice of method of pay, Industrial and Labor Relations Review, Vol. 43,
pp. 165s-82s.
Center for Human Resource Research (1999), NLSY79 Users Guide, CHRR, Columbus, OH.
Drago, R. (1991), Incentives, pay, and performance: a study of Australian employees, Applied
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Eberts, R. and Stone, J. (1985), Wages, fringe benefits, and working conditions: an analysis of
compensating wage differentials, Southern Economic Journal, Vol. 52, pp. 274-80.
Ewing, B.T. (1996), Wages and performance-based pay: evidence from the NLSY, Economic
Letters, Vol. 51, pp. 241-6.
Geddes, D.A. and Heywood, J.S. (forthcoming), Gender and piece rates, commissions and
bonuses, Industrial Relations.
Gibbons, R. (1998), Incentives in organizations, Journal of Economic Perspectives, Vol. 12 No. 4,
pp. 115-32.
Greene, W.H. (1981), Sample selection bias as a specification error: comment, Econometrica,
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Gunderson, M. (1989), Male-female wage differentials and policy responses, Journal of
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Heckman, J.J. (1976), The common structure of statistical models of truncation, sample selection,
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Economic and Social Measurement, Vol. 5, pp. 475-92.
Hersch, J. (1996), Smoking, seat belts and other risky consumer decisions: differences by gender
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Pennsylvania Press, Philadelphia, PA, pp. 91-103.
Hubbard, R.G. and Palia, D. (1995), Executive pay and performance: evidence from the US
banking industry, Journal of Financial Economics, Vol. 39 No. 1, pp. 105-30.
Jensen, M.C. and Murphy, K.J. (1990), Performance pay and top-management incentives,
Journal of Political Economy, Vol. 98 No. 2, pp. 225-64.

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Jianakoplos, N.A. and Bernasek, A. (1998), Are women more risk averse?, Economic Inquiry,
Vol. 36 No. 4, pp. 620-30.
Lazear, E.P. (1986), Salaries and piece rates, Journal of Business, Vol. 59 No. 3, pp. 405-31.
Lazear, E.P. (2000), Performance pay and productivity, American Economic Review, Vol. 90
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pp. 175-209.
Murphy, K.M. and Topel, R.H. (1985), Estimation and inference in two-step econometric
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Olson, C.A. (2002), Do workers accept lower wages in exchange for health benefits?, Journal of
Labor Economics, Vol. 20 No. 2, pp. S91-S114.
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Relations Review, Vol. 53 No. 1, pp. 71-86.
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Handbook of Labor Economics, Vol. 1, North-Holland, Amsterdam.
Sciler, E. (1984), Piece rates versus time rate: the effect of incentives on earnings, The Review of
Economics and Statistics, Vol. 66 No. 3, pp. 363-76.
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Appendix. Data
Hourly wage computation
The hourly wage variable used in the analysis is taken from the Hourly Rate of Pay Job #1
variable constructed by Center for Human Resource Research (CHRR). This variable provides the
hourly wage rate for the main job reported by respondents. The actual responses of those
respondents who report wages with an hourly time unit in the initial earnings question appear in
this variable. For those reporting a time unit other than per hour or other in the initial
earnings question, CHRR calculates an hourly rate of pay. The calculation procedure employed
by CHRR factors in each respondents usual wage, time unit of pay, and usual hours worked per
day/per week (Center for Human Resource Research, 1999).
Performance-based pay schemes
The variables used in our analysis to indicate the receipt of a particular type of
performance-based pay scheme are taken from responses to the following question:
THE EARNINGS ON SOME JOBS ARE BASED ALL OR IN PART ON HOW A PERSON PERFORMS
THE JOB. (HAND CARD D) ON THIS CARD ARE SOME EXAMPLES OF EARNINGS THAT ARE
BASED ON JOB PERFORMANCE. PLEASE TELL ME IF ANY OF THE EARNINGS ON YOUR JOB
(ARE/WERE) BASED ON ANY OF THESE TYPES OF COMPENSATION. PLEASE DO NOT
INCLUDE PROFIT SHARING OR EMPLOYEE STOCK PURCHASE PLANS.
EARNINGS OF CURRENT JOB/MOST RECENT JOB BASED ON: WHICH ONES?
1 PIECE RATE
2 COMMISSIONS
3 BONUSES (BASED ON JOB PERFORMANCE)
4 STOCK OPTIONS
5 TIPS
6 OTHER
CHOOSE ALL THAT APPLY

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Variable names

Description

White
Hispanic
Black
Native American
Immigrant
Age

Race dichotomous variables

Immigrant dichotomous variable

Age of respondent

Years schooling

Number of completed years of schooling

AFQTa

Armed Forces Qualification Test percentile

score
Marital status dichotomous variable
Number of children in the household

Married
Kids
Young child

Dichotomous variable indicating the presence

of any children less than two years old
Real hourly wage Hourly rate of pay in 1996 dollars

Table AI.
Variable description,
means, and standard
deviations (for
continuous variables)

Log real hourly

wage
Piece rate
Commission
Bonus
Stock options
Tips
Other incentives
Insurance
Retirement
Profit sharing
Training
Childcare
Firm size

Total number of employees at the firm

Tenure

Tenure in weeks

Occupational
experience
Industry
experience
Industries:
Agriculture and
mining
Construction
Manufacturing
TCPU

Occupational experience in weeks

Trade

Log of hourly rate of pay in 1996 dollars

Dichotomous variables indicating whether
the respondent received a particular type of
performance-based incentive (see data
appendix)
Dichotomous variables indicating whether
the respondent received a particular type of
job benefit (see data appendix)

Industry experience in weeks

Dichotomous variables for working in:
Agriculture and mining
Construction
Manufacturing
Transportation, communications, and other
public utilities
Wholesale and retail trade

Men

Women

0.583
0.148
0.245
0.024
0.039
30.747
(4.486)
12.921
(2.479)
2 4.782
(22.490)
0.539
0.908
(1.167)

0.569
0.142
0.264
0.025
0.033
30.952
(4.525)
13.294
(2.272)
2 2.959
(19.888)
0.544
1.220
(1.186)

0.396
12.981
(8.493)
2.407
(0.550)
0.033
0.062
0.144
0.021
0.020
0.027
0.780
0.569
0.277
0.443
0.053
552.270
(2,794.402)
208.415
(214.583)
108.320
(120.248)
146.671
(156.968)

0.471
10.528
(6.698)
2.204
(0.545)
0.025
0.037
0.103
0.010
0.035
0.020
0.784
0.570
0.258
0.486
0.074
486.667
(1,989.297)
195.609
(207.302)
104.678
(120.981)
150.937
(164.903)

0.046
0.121
0.236

0.012
0.012
0.139

0.098
0.174

0.051
0.184
(continued)

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Variable names

Description

FIRE
Services
Public
administration
Occupations
Farming
Craftsmen
Operators
Managerial
Sales
Administrative
support
Service
Union status
Fixed work shift
Urban

Finance, insurance, and real estate

Services
Public administration
Dichotomous variables for occupations in:
Farming
Craft and related services
Machine operators
Managerial positions
Sales
Administrative support and clerical
Other service related occupations
Unionization dichotomous variable
Dichotomous variable indicating a fixed shift
Dichotomous variable indicating an urban
area
Local unemployment rate

Men

Women

0.042
0.230

0.087
0.459

0.054

0.056

0.038
0.200
0.256
0.243
0.076

0.007
0.021
0.094
0.313
0.100

0.070
0.114
0.193
0.687

0.275
0.189
0.156
0.698

0.781
0.783
5.766
5.762
(2.440)
(2.479)
Year dichotomous variables
0.226
0.222
0.227
0.221
0.196
0.192
0.157
0.163
0.195
0.201
Inverse Mills ratio from selection equations
0.213
0.291
(0.068)
(0.083)
Note: a The AFQT numbers are deviations from the mean percentile score of their birth cohort.
Therefore, people below average for their birth year will have a negative score. The overall
average is also negative, which may be related to the over-sampling of the poor white population.
The AFQT scores are reported in this manner by the Center for Human Resource Research since
the test was taken at different points in time for the youths
Source: Authors tabulations using the NLSY79

Unemployment
rate
Year 1988
Year 1989
Year 1990
Year 1996
Year 1998
Lambda

Performance pay
and fringe
benefits
695

Table AI.

IJM
24,6

1988
Male
Hispanic

696

Black
Native American

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Immigrant
Age
Years schooling
AFQT
Married
Kids
Young child
Urban
Unemployment
rate
Constant
Number of obs.
Wald chi2(14)
Log likelihood

0.264***
(0.035)
0.057
(0.058)
20.018
(0.047)
20.105
(0.104)
20.004
(0.099)
0.013
(0.008)
0.037***
(0.010)
0.004***
(0.001)
0.195***
(0.039)
20.062***
(0.025)
20.081
(0.054)
20.090**
(0.045)
20.023***
(0.007)
0.335
(0.248)
8,165
211.55
2 3,363.14

1989
0.257***
(0.035)
0.112*
(0.059)
0.035
(0.048)
0.022
(0.102)
0.135
(0.107)
0.015*
(0.008)
0.023**
(0.010)
0.005***
(0.001)
0.140***
(0.040)
20.049**
(0.023)
20.108**
(0.051)
20.088**
(0.045)
20.022***
(0.009)
0.426*
(0.254)
8,254
171.14
23,372.67

1990
0.194***
(0.039)
0.158***
(0.063)
2 0.055
(0.052)
2 0.110
(0.126)
2 0.032
(0.108)
0.021**
(0.009)
0.018
(0.011)
0.006***
(0.001)
0.207***
(0.044)
2 0.068***
(0.025)
2 0.073
(0.054)
0.010
(0.051)
2 0.033***
(0.010)
0.404
(0.301)
6,984
177.39
22,665.99

1996
0.300***
(0.043)
0.107
(0.070)
2 0.020
(0.057)
0.071
(0.144)
0.005
(0.125)
0.022**
(0.010)
0.029**
(0.012)
0.006***
(0.001)
0.166***
(0.048)
2 0.004
(0.021)
2 0.088*
(0.053)
2 0.114**
(0.056)
2 0.028***
(0.007)
0.113
(0.371)
5,772
155.27
22,177.15

1998
0.244***
(0.040)
0.012
(0.065)
0.018
(0.052)
2 0.123
(0.126)
0.175
(0.119)
0.007
(0.009)
0.023**
(0.010)
0.005***
(0.001)
0.156***
(0.044)
2 0.058***
(0.021)
0.289***
(0.058)
2 2.7e-04
(0.044)
2 0.003
(0.008)
0.317
(0.352)
7,060
142.34
22,611.83

Notes: Whites robust standard errors shown in parentheses. * Indicates significance at the 10
Table AII.
Sample selection probits percent level; ** indicates significance at the 5 percent level; and *** indicates significance as the
1 percent level. White is used as reference
for the entire sample

1988
Hispanic
Black
Native American
Immigrant

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Age
Years schooling
AFQT
Married
Kids
Young child
Urban
Unemployment
rate
Constant

0.100
(0.084)
20.054
(0.068)
20.084
(0.153)
0.077
(0.150)
0.003
(0.012)
0.021
(0.015)
0.006***
(0.002)
0.380***
(0.066)
20.009
(0.052)
0.039
(0.106)
20.173***
(0.069)
20.042***
(0.011)
1.116***
(0.373)

1989
20.057
(0.082)
20.042
(0.068)
20.028
(0.153)
0.103
(0.145)
20.002
(0.012)
20.005
(0.014)
0.007***
(0.002)
0.259***
(0.066)
0.006
(0.044)
0.117
(0.096)
20.107
(0.068)
20.023*
(0.013)
1.418***
(0.374)

1990
2 0.041
(0.091)
0.182**
(0.074)
0.026
(0.214)
0.009
(0.159)
0.001
(0.013)
2 0.013
(0.016)
0.005***
(0.002)
0.429***
(0.073)
2 0.077*
(0.044)
0.085
(0.095)
0.127*
(0.075)
2 0.026*
(0.014)
1.340***
(0.441)

1996
0.148
(0.112)
20.096
(0.085)
0.260
(0.263)
20.137
(0.184)
0.013
(0.015)
0.039**
(0.018)
0.004*
(0.002)
0.460***
(0.084)
0.028
(0.037)
20.043
(0.092)
20.001
(0.084)
20.043***
(0.012)
0.417
(0.571)

1998
2 0.016
(0.098)
2 0.121*
(0.074
2 0.100
(0.208)
0.060
(0.167)
2 0.004
(0.013
0.015
(0.015)
0.004**
(0.002)
0.350*
(0.074)
0.006
(0.036)
0.135
(0.092)
2 0.042
(0.067)
2 0.025**
(0.011)
1.159**
(0.515)

Performance pay
and fringe
benefits
697

Number of obs.
4,169
4,230
3,587
2,875
3,563
Wald chi2(13)
122.63
101.26
100.04
105.24
108.13
Log likelihood
2 1,486.81
21,498.90
21,220.68
2 897.47
21,161.45
Notes: Whites robust standard errors shown in parentheses. * Indicates significance at the 10
Table AIII.
percent level; ** indicates significance at the 5 percent level; and *** indicates significance as the Sample selection probits
1 percent level. White is used as reference
for men

IJM
24,6

1988
Hispanic
Black

698

Native American
Immigrant

Downloaded by SAUDI DIGITAL LIBRARY (SDL) At 09:55 22 January 2016 (PT)

Age
Years schooling
AFQT
Married
Kids
Young child
Urban
Unemployment
rate
Constant

0.024
(0.080)
0.044
(0.066)
20.093
(0.145)
20.096
(0.139)
0.021*
(0.011)
0.039***
(0.015)
0.003**
(0.002)
0.018
(0.051)
20.112***
(0.031)
20.199***
(0.066)
20.019
(0.061)
20.007
(0.009)
0.122
(0.335)

1989
0.271***
(0.084)
0.136**
(0.068)
0.065
(0.141)
0.211
(0.156)
0.028***
(0.011)
0.038***
(0.014)
0.004***
(0.002)
20.026
(0.052)
20.102***
(0.030)
20.277***
(0.064)
20.086
(0.061)
20.021*
(0.012)
0.042
(0.347)

1990
0.345***
(0.088)
0.083
(0.074)
2 0.188
(0.165)
2 0.014
(0.148)
0.040***
(0.013)
0.037**
(0.016)
0.009***
(0.002)
4.7e-04
(0.059)
2 0.100***
(0.032)
2 0.186***
(0.068)
2 0.085
(0.072)
2 0.036***
(0.014)
2 0.159
(0.415)

1996
0.114
(0.092)
0.036
(0.076)
2 0.020
(0.180)
0.141
(0.168)
0.026**
(0.013)
0.016
(0.016)
0.008***
(0.002)
2 0.066
(0.062)
2 0.058**
(0.027)
2 0.154**
(0.066)
2 0.198***
(0.076)
2 0.015
(0.100)
0.350
(0.494)

1998
0.062
(0.088)
0.151**
(0.073)
2 0.106
(0.160)
0.291*
(0.170)
0.015
(0.012)
0.022
(0.014)
0.006***
(0.002)
0.016
(0.057)
2 0.107***
(0.027)
0.307***
(0.078)
0.040
(0.059)
0.018*
(0.011)
2 0.003
(0.482)

Number of obs.
3,996
4,024
3,397
2,897
3,497
Wald chi2(13)
140.29
162.72
141.84
64.68
52.60
Log likelihood
2 1,822.67
21,804.14
21,399.37
21,243.64
21,423.82
Notes: Whites robust standard errors shown in parentheses. * Indicates significance at the 10
Table AIV.
Sample selection probits percent level; ** indicates significance at the 5 percent level; and *** indicates significance as the
1 percent level. White is used as reference
for women

This article has been cited by:

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1. Ali Fakih. 2014. Vacation Leave, Work Hours, and Wages: New Evidence from Linked EmployerEmployee Data. LABOUR 28:10.1111/labr.2014.28.issue-4, 376-398. [CrossRef]
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