Performance Pay Jobs and Job Satisfaction

Abstract

In recent decades there have been a growing number of studies that investigated the effects of personal and job characteristics on the subjective well-being on the job. Besides, the empirical findings reveal that workers who are paid on the piece rates exert more effort and earn more than those workers paid an hourly salary. Since the possible effects of performance paying jobs on the well-being of workers stay hidden, we have tackled the following issue by providing the effects that the performance pay job schemes have on job satisfaction. We have used the Korean Labour and Income Panel Survey which allowed us to distinguish between the workers who are paid by performance and those who are paid by fixed rate. We have shown that workers in the performance pay job schemes have a higher subjective well-being on the job than workers who are using the non-performance pay job schemes. The following result holds true even after we have controlled for the level of earnings, attitudes towards risk, and other personal and job-related characteristics. Finally, we have exploited the information on the type of performance pay schemes to analyse how different performance pay schemes affect job satisfaction. The results have shown that workers who are employed on either individual or group or company performance pay job schemes are more satisfied on their job than workers who are paid by the fixed amount.