NCPA - National Center for Policy Analysis

Piecework Pays Off

February 17, 1997

To obtain greater productivity, business managers should consider paying on the basis of piecework, rather than paying hourly wages, according to the results of experiments by Edward P. Lazear of Stanford University.

  • In 1994 and 1995, Safelite Glass Corporation, an installer of automobile glass, offered workers who had been guaranteed about $11 an hour the alternative of receiving $20 per unit installed -- thus giving them the incentive to work faster.
  • Average productivity per worker rose 20 percent and workers' earnings increased by 10 percent.
  • Overall company output surged by 36 percent.

The bonus from rising worker productivity was enhanced by less absenteeism and lower turnover among the most productive workers, along with greater attrition of less productive workers.

Source: Gene Koretz, "Truly Tying Pay to Performance," Business Week, February 17, 1997.

 

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