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Pay, Productivity and Management

Author

Listed:
  • Nicholas Bloom
  • Scott W. Ohlmacher
  • Cristina J. Tello-Trillo
  • Melanie Wallskog

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.

Suggested Citation

  • Nicholas Bloom & Scott W. Ohlmacher & Cristina J. Tello-Trillo & Melanie Wallskog, 2021. "Pay, Productivity and Management," NBER Working Papers 29377, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29377
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    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • L0 - Industrial Organization - - General

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