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Abstract

Vol. 54, No. 3, pp. 193-205 (2003)

“The Effects of Performance Pay on Work Motivation”
Fumio Ohtake (Institute of Social and Economic Research, Osaka University), Koji Karato (Department of Economics, Toyama University)

This paper empirically investigates the effects of the introduction of a performance pay system on work motivation in Japan. The results of the paper can be summarized as follows:
First, the introduction of a performance pay system does not by itself affect the work motivation of employees.
Second, performance pay has positive effects on the work motivation of white collar employees if it is introduced concurrently with changes in the work environment that are conductive to for performance pay, such as greater delegation of responsibility to workers and increases in job training opportunities.
Third, the work motivation of employees is high for employees of firms which introduced a performance pay system who received pay increases.
Fourth, employees often do not realize that the firm introduced a performance pay system. They tend to realize that the firm introduced a performance pay system when they receive pay increases.