Abstract

In the delayed payment system, companies motivate workers to work hard year after year by paying them less than the value they create for the company early in the workers' tenure and more than the value they create for the company later in the workers' tenure. With efficiency wages, workers are essentially paid a wage that is higher than the next-best offer they could get. A paper by Alan Krueger found that at company-owned fast food restaurants, employee compensation is higher and the delayed payment profile is steeper than at franchised outlets. In a recent paper, Matthew Freedman and Renata Kosova found that company-owned hotels are more likely than franchised ones to advertise wages above minimum wages, but are also more likely to use lower probationary wages. The research shows that how closely workers can be monitored, the degree to which managers share in profits, and the timing of pay and other attributes of employee compensation design are inseparable.

Document Type

Article

Publication Date

3-2011

Publisher Statement

Contents © 2011. Reprinted with permission from WorldatWork. Content is licensed for use by purchaser only. No part of this article may be reproduced, excerpted or redistributed in any form without express written permission fromWorldatWork.

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