Pay, Productivity and Management
September 2021
Working Paper Number:
CES-21-31
Abstract
Using confidential Census matched employer-employee earnings data we find that employees at more productive firms, and firms with more structured management practices, have substantially higher pay, both on average and across every percentile of the pay distribution. This pay-performance relationship is particularly strong amongst higher paid employees, with a doubling of firm productivity associated with 11% more pay for the highest-paid employee (likely the CEO) compared to 4.7% for the median worker. This pay-performance link holds in public and private firms, although it is almost twice as strong in public firms for the highest-paid employees. Top pay volatility is also strongly related to productivity and structured management, suggesting this performance-pay relationship arises from more aggressive monitoring and incentive practices for top earners.
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disclosure,
earnings,
employed,
executive,
employee,
organizational,
accounting,
profit,
revenue,
incentive,
salary,
workers earnings,
earner,
employment earnings,
compensation,
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Bureau of Labor Statistics,
National Science Foundation,
Census of Manufactures,
Annual Survey of Manufactures,
Social Security Administration,
National Bureau of Economic Research,
Employer Identification Number,
Current Population Survey,
Longitudinal Business Database,
Decennial Census,
Economic Census,
North American Industry Classification System,
Longitudinal Employer Household Dynamics,
Census Bureau Disclosure Review Board,
Disclosure Review Board,
Federal Statistical Research Data Center
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