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Piece Rates and Workplace Injury: Does Survey Evidence Support Adam Smith?

Keith Bender2, Colin Green 1, John Heywood2
1Lancaster University, UK, 2University of Wisconsin-Milwaukee, USA

Piece rates are routinely associated with greater productivity and a positive wage premium. Yet, piece-rates may also generate unanticipated and unprofitable effects. This paper uses cross-country European data to demonstrate a strong link between piece rates and workplace injury. Despite unusually good controls for workplace hazards, job characteristics and worker effort, workers on piece rates suffer a 5 percentage point greater likelihood of injury. As injury rates are typically not controlled for when estimating the premium to piece rates, our results raise the specter that a portion of the return to piece rates reflects a compensating wage differential for risk of injury.

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