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theses

Efficiency wage theory suggests that paying workers above the market or minimum rate can be more efficient for the firm, since the increased productivity more than pays for the increased wages. And yet, workers can be paid in stock, not just wages, and the two forms of compensation may motivate workers in different ways, leading to different outcomes, as well as affecting cash flow in different ways. Employee ownership as a form of efficiency wages has not been examined before, and given its potential to affect employee attitudes and behaviors as well as firm performance, it is worth investigating. Using data from employee surveys matched to average wages for comparable workers outside the firm, I examined both an objective measure of worker pay relative to the market and a subjective measure of workers’ perception of pay relative to the market. The general finding is that when wages were perceived as being below market, higher wages had a positive effect on a number of performance-related attitudes, but ownership did not. For wages above market, in contrast, ownership had positive effects on a number of attitudes. Whether the wages were below or above market, the employees’ perception of their pay relative to market pay was more important than what they were actually paid, which may reflect better information workers have about competitor local wages and conditions of employment. The results indicate that employee ownership may act like efficiency wages in some important respects, and may complement efficiency wages by having stronger effects when wages are above market.

ETD_6029

M.S.

Includes bibliographical references

by Dan Weltmann

doi:10.7282/T33N2546

ETD graduate

The author owns the copyright to this work.