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The Effects Of Gain Sharing On The Basic Wage: The Case Of Improshare, Roger T. Kaufman

Economics: Faculty Publications

Although gain-sharing plans are typically promoted to workers as a way of increasing total compensation, workers are often concerned that gain-sharing bonuses may becvomne substitutes for future wage increases that would have occurred in the absence of the plan. I examine the theoretical and empirical interaction among wages, bonuses, effort, and productivity in firms that implemented IMPROSHARE, a well-known gain-sharing plan. Using longitudinal data obtained from detailed survey questionnaire, I find that one can usually reject both the perfectly competitive model in which effort is held constant (in which case bonuses are a perfect substitute for wages) and the 'pure …