What is the most flexible component of wage bill adjustment? Evidence from Belgium

Fuss, Catherine

doi:10.1016/j.labeco.2008.11.005

Cited by 19 publications

(9 citation statements)

References 26 publications

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“…First, instead of firing workers, firms often use natural fluctuations to reduce the level of staffing (Fuss, ). The existence of such policies is quite surprising as firms can more rapidly adjust their labour force via lay‐offs.…”

Section: Discussionmentioning

confidence: 99%

The Hidden Costs of Downsizing

Drzensky

Heinz

2015

Econ J

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Section: Discussionmentioning

confidence: 99%

The Hidden Costs of Downsizing

Drzensky

Heinz

2015

Econ J

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“…It means that in the face of asymmetric information, firms should tie the remuneration of employees to any verifiable (individual or collective) signal of performance. Based on such a theoretical prediction, a number of studies in recent years have shown that, when implemented wisely, financial incentives have the potential to exert strong effects on indicators of firm performance, such as productivity (Damiani and Ricci ; Fuss ; Gielen, Kerkhofs, and Ours ; Lazear ), labor demand for flexible workers (Benito and Hernando ), and workers' effort (Brown, Fakhfakh, and Sessions ; Gomez‐Mejia and Balkin ; Wilson and Peel ). By exploiting another dimension of wage flexibility Guiso, Pistaferri, and Schivardi () find that sensitivity of workers' wages to permanent shocks is negatively correlated with the workers' risk aversion and the overall variability of firm performance.…”

Section: Introductionmentioning

confidence: 99%

Flexible Wage Contracts, Temporary Jobs, and Firm Performance: Evidence From Italian Firms

Battisti

Vallanti

2013

Industrial Relations

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This study focuses on the effects of decentralized wage schemes and temporary forms of employment on firm performance. The effect of monetary incentives on workers' effort and firm performance is a central topic in economics. According to the principal-agent paradigm, firms (the principal) have to link employees' remuneration schemes to any verifiable indicator of performance to avoid opportunistic behavior. The empirical evidence shows that financial incentives have the potential to exert strong effects on indicators of firm performance, such as productivity and worker absenteeism, although the degree of effectiveness of such schemes varies significantly according to the institutional/economic context in which firms operate. From both a theoretical and empirical point of view, the prediction on the effects of temporary types of employment on effort and productivity is less neat. In light of these considerations, this study uses a sample of Italian firms to provide further empirical evidence on whether and to what extent performance-related pay schemes and contract flexibility affect workers' effort (in terms of absenteeism) and, in turn, firm productivity. These effects are analyzed for different types of workers (white collar vs. blue collar), working in workplaces characterized by a different degree of uncertainty and risk and in firms operating in different economic and institutional settings. Our results show that wage flexibility has a significant effect on effort and then on firm's productivity and that white-collar workers are more responsive to monetary incentives than blue-collar workers. Moreover, the presence of a large share of temporary contracts, implying a lower dismissal probability for permanent workers and a deterioration of the working environment, appears to reduce workers' motivation and effort.

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“…19 Bartling and Fischbacher (2012) present experimental evidence from the laboratory that shifting the blame works and reduces the extent of negative reciprocity. Fuss (2009) shows that firms often reduce their wage costs by relying on early retirement or the natural fluctuation of the workforce and by adjusting the amount of overtime hours or temporary workers rather than firing permanent workers.…”

Section: Discussionmentioning

confidence: 99%