A SURVEY OF 'I'HE USE OF WAGE INCEN'rIVE PLANS

AMONG lVIANUFAC'l'URING PLAN'l'S WITHIN THE

COlVD.VIONWEALTH O:F' VIRGINIA AS A 'l'EST

OF' THE 'l'HEORY OF WAGE INCENTIVES

by

Michael Neff Cassell

Thesis submitted to the Graduate Faculty of the

Virginia Polytechnic Institute

APPROV.SD:

in candidacy for the degree of

MASTER OF SCIENCE

in

Business Administration

Dr. Arthur A. Thompson, Jr., Chairman

Dr. Norman L. Brown

Prof. John M. Barringer, Jr.

Blacksburg, Virginia

June, 1966

CHAPl'ER

I.

II.

-ii-

TABU OF CON'rEN'rS

INTRODUCTION ••• • • • • • • • • 0

Background . . . . . . . . . . Statement of the Problem . . . Importance and Scope of the

Study • • • • • • • • • •

Organization of Subsequent Chapters • • • • • • • •

REVIEW OF THE LITERATURE. . . .

• •

• •

. . Introduction . . . . . . . . . Definition and Theory of

Wage Incentive Plans • • . . Definition • • . . . . . . 'rheory of Wage Incentive

Plans • • • • • • • • •

Types of Wage Incentive Plans • • • • • • • • • • . .

Daywork . . . . . . . . . Measured Daywork •• . . . Piecework . . . . . . . . Standard Hours Plans • . . Sharing Plans

Group Plans

. . . . . . . . . . . . .

PAGE

l

1

2

3

5

6

6

6

6

12

14 15 17 18

19 21

-iii-

CHAPTER PAGE

Advantages of Wage Incentive Plans Versus Problems Incurred in Their Application. • • • • • • • • 22

III.

Advantages of Wage Incentive Plans . . . .

Problems Incurred in Application of Wage Incentive Plans •• • •

METHODOLOOY . . . . . . . . . . . . Collection of the Data

Selection of the Sample ••••

Design of the Questionnaire

Distribution of Questionnaire

Analysis of the Data

. . . .

• • • • •

• • • • •

. . . . . • • • • •

IV. RESULTS OF THE SURVEY • • • • • • •

Introduction . . . . . . . . . General Characteristics of

Responding Plants •••• • • Length of Operation • • •

Use of Wage Incentive Plans • • • • • • •

Number of Hourly Workers ••• . . .

Union Versus Non-Union

• •

• •

. .

22

24

26

26

26

28

31 31

33 33

34

34

34

36

39

CHAP'£ER

-iv-

Plants Not Employing Wage Incentive Plans •••• • • •

Reasons Plants Have Never Employed Wage Incentive Plans •••••••••

• • •

• • •

Reasons Plants Have Discontinued Use of Wage Incentive Plans . . . . .

Plants That Do Employ Wage Incentive Plans •••••

Reasons Plants Employ • • • • •

PAGE

42

42

47

Wage Incentive Plans. • • • • 47

Types of Wage Incentive Plans Used ••••••• • • •

Effects of Wage Incentive Plans in Use • •. • • •

Summary • • • • • • • • • • •

• • • •

• • • •

53

v. CONCLUSIONS • • • • • • • • • • • • • • • •

60

73

75 Extent of the Use of Wage

Incentive Plans ••••

Effects of Unions Upon Use • • • • • • 75

of Wage Incentive Plans. • • • • • 77

Reasons for Not Employing Wage Incentive Plans • • • • • • • 78

Reasons for Employing Wage Incentive Plans ••••• • • • • •

Types of Wage Incentive Plans Employed •••••••••

Effects of Wage Incentive • • • •

Plans • • • • • • • • • • • • • • •

79

79

80

CHAP'l'ER

VI.

VII.

VIII.

Summary

BIBLIOGRAPHY

-v-

. . . . . . . . . . . . . • • • • • • • • • • • • •

ACKNOWLEDGMENTS. • • • • . . • • . . . VITA ••• APPENDIX A

APPENDIX B

APPENDIX C

. . . . . . . . . . . . . .

. . . . . . . . . . . . . . • • • • • • • • • • • • • •

• • • • • • • • • • • • • •

PAGE

83

85

87 88

89 91 99

TABLE

1.

2.

6.

s.

10.

11.

12.

-vi-

LIST OF TABLES

Comparison of General Information Concerning Plants in Different Industrial Classifications ••• • •

Comparison of Answers by Respondents with Different NUl.llbers of Hourly Workers • • • • •

Comparison of Answers by Respondents with Varying Numbers of Hourly Workers • • • • •

Comparison of Answers by Union Versus Non-Union Respondents • • • •

Comparison of Answers by Union Versus Non-Union Respondents.

Reasons Plants Have Never Employed Wage Incentive Plans

Reasons Plants Have Discontinued

• • •

• • •

Use of Wage Incentive Plans ••••

Reasons Plants Employ Wage Incentive Plans •••• • • • •

Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

• •

• •

• •

• •

Types of Wage Incentive Plans Employed by Respondents •• . . . .

PAGE

35

37

38

/+3

45

1+8

49

51

52

55

TABLE

13.

14.

15.

16.

17.

19.

20.

-vii-

Comparison of Answers Given by Plants Employing the Different Types of Wage Incentive Plans

Comparison of Answers Given by Plants Employing the Different Types of Wage Incentive Plans

Types of Wage Incentive Plans Used by Plants in the Various Industry Classifications ••

Effect of Wage Incentive Plans on Earnings of Hourly Workers

• • •

. . .

• • •

• • •

Effects of the Wage Incentive Plans in Use •••••••• • • • •

Effects of Different Types of Wage Incentive Plans in Use

Effects of Different Types of Wage Incentive Plans in Use

• • • •

• • • •

PAGE

57

58

59

62

65

69 Tabulation of Number of

Questionnaires Sent and Returned for Each Industry Classification •••••• • • • •• 100

21. Comparison of Answers Given by

22.

23.

Plants Having Different Reasons for Not Employing Wage Incentive Plans •••••••••• 101

Comparison of Answers Given by Plants Having Different Reasons for Not Employing Wage Incentive Plans •••••••• • •

Reasons Wage Incentive Plans Not Used ••••••••• • • • • •

102

103

TABLE

24.

26.

-viii-

Comparison of Answers Given by Plants Having Different Reasons for Discontinuing Wage Incentive Plans . . . . . . . . . . . . .

Comparison of Answers Given by Plants Having Different Reasons for Discontinuing Wage Incentive Plans . . . . . . . . . . . . .

Comparison of Answers Given by Plants Having Different Reasons for Discontinuing Wage Incentive Plans • • • • • • • • • • • • •

Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

PAGE

• • 104

• • 105

• • 106

• • 107

Background

CHAPTER I INTRODUCTION

Wage incentive plans are systems of remunerating

workers whereby employee earnings are determined by a

formula relating an employee's performance to a

specific standard of performance. Wage incentive

plans have two essential characteristics: 1) a

standard of performance for each job is specifically

established; and, 2) the worker's earnings are

directly and automatically varied according to an

established formula for relating actual performance

to the standard. 1

The theory of wage incentives reflects the theory

of economic motivation. Reduced to syllogistic form

it holds:

"That workers work for monetary reward.

That for additional remuneration, workers

will increase output.

1William B. Wolf, Wage Incentives as a ~Ianagerial

Tool, p. 5.

-2-

That, therefore, a system of pay that

automatically ties earnings to output 2

increases production."

It follows, then, that by using wage incentive

plans management can pay workers for work done rather

than for hours served. From the worker's point of

view such a plan enables him to earn compensation in

direct relation to his output.

Statement of the Problem

The purpose of this thesis is to test the theory

of wage incentives by examining: 1) the extent of

the use of wage incentive plans among manufacturing

plants; 2) the reasons why these plans either are,

or are not employed; and, 3) the impact of wage

incentive plans. This is to be accomplished by a

questionnaire survey of manufacturing plants. More

specifically, the survey was conducted in an attempt

to answer the following questions:

1) How extensively are wage incentive plans

employed in manufacturing industry in

Virginia?

2Ibid.,pp. 72-73.

2) In what industries are wage incentives most

prevalent?

J) What effect does union representation of

hourly workers have on the use of wage

incentive plans?

4) What are the reasons for using or not using

wage incentive plans?

5) What are the various effects of wage incentive

plans upon production?

6) What implications, if any, do the answers to

the questions above have for the use of wage

incentive plans in general?

Importance and Scope of the Study

Much of the literature dealing with wage incentive

plans is based on the wage incentive experience and

philosophy of manufacturing plants in the highly

industrialized areas of the northeastern and midwestern

United States. Many of these plants are characterized

by such factors as heavy industry, large numbers of

hourly workers, and extensive union representation of

these workers.

On the other hand, the manufacturing industries

within the state of Virginia are characterized by

-4-

relatively less heavy industry (Table 20, Appendix C),

comparatively fewer hourly workers in the average plant,

and less union representation of these workers, than are

the manufacturing industries of the more highly

industrialized areas. These features of Virginia's

manufacturing industries may be attributed, in part,

to the state's pastoral heritage, a somewhat sparse

population, and a so-called "right-to-work" law.

If the theory upon which wage incentive plans are

founded (i.e., that a worker will increase his

productivity if paid for work done rather than for

hours served) is sound, then these plans should be as

successful under the conditions prevailing in

manufacturing industries in Virginia, as they are

in the more highly industrialized areas.

It is believed, therefore, that the empirical

data compiled by this survey and the conclusions drawn

from analysis of the data, will add to the knowledge

concerning the applicability of wage incentives and

their ability to help increase the productivity of

labor.

The data for this study were collected by means

of a questionnaire sent to a randomly selected sample

-5-

of manufacturing plants, with 50 or more employees,

operating within the state of Virginia. Plants in

20 different manufacturing classifications were

surveyed.

Organization of Subsequent Chapters

Chapter II presents a review of some of the more

relevant literature concerning wage incentive plans.

The chapter consists of a discussion of the theory of

wage incentives, a broad definition of the more general

types of wage incentive plans, and a comparison of some

of the advantages and weaknesses of the use of these

plans.

An explanation of the methods used in collecting

and analyzing the data obtained from the survey can be

found in Chapter III.

Chapter IV consists of tabulations and analysis

of the results of the survey and is divided into

discussions of: the general characteristics of

responding plants, plants not employing wage incentive

plans, and plants that do employ wage incentive plans.

The conclusions drawn from the results of the

survey are presented in Chapter V and serve as answers

to the questions posed in this Chapter.

-6-

CHAPTER II REVIEW OF THE LITERATURE

A. Introduction

In this chapter an attempt is made to review the

literature pertaining to wage incentive plans and their

application. The chapter is divided into three parts:

1) A definition of wage incentive plans followed

by a brief discussion of the theory upon which such

plans are based.

2) A cursory explanation of some of the more

general types of wage incentive plans in popular use,

corresponding to those plans included in the

questionnaire discussed in Chapter III.

3) A discussion of the major advantages of

wage incentive plans and, by contrast, the more serious

problems incurred in the use of such plans.

B. Definition and Theory of Wage

Incentive Plans

Definition

For the purposes of this thesis the term "wage

incentive plan" refers to a system of remunerating

hourly (i.e., rank and file or non-salaried) workers

-7-

whereby the earnings of a worker, or a group of

workers, are related to his output by a predetermined

formula relating his actual performance to a specific

standard of performance.

Wage incentive plans have two essential

characteristics: l) a standard of performance for

each job or task is specifically established; and

2) the worker's earnings are directly and automatically

varied according to an established formula for relating

actual performance to the standard. 1

It is important here to differentiate between

wage incentive plans or "wage incentives" and so-called

"time wages," "daywork," "time work," or "straight-

time," under which methods of wage payment the worker

is paid on the basis of the time he works rather than

according to his output.

By comparison with wage incentive plans, the

time wage system has implied standards of output and

the worker's hourly wage rate does not necessarily

reflect the level of his productivity and efficiency.

Thus, the standard of output is implicit rather than

1Wolf, .2:E.• fil., p. 5.

explicit and the relationship between earnings and

output is not direct or automa.tic. 2

From management's viewpoint, wage incentive

plans, " •••• change the basis for paying workers from

time rate to piece rate or change the pay basis from

payment for hours served to payment for work done.

From the employee's point of view an incentive plan

enables him to earn compensation in direct relation to

his output. If he works harder than his neighbor,

his effort will be recognized by increased

compensation." 3

Theory of Wage Incentive Plans

The theory underlying wage incentive plans is

derived from the recognition that human beings seek to

satisfy certain basic needs. In this view, it is

believed that although a worker may increase his output

for more money, his behavior and productivity are

affected by the stimulus of satisfying his basic needs.

Some of the more prominent basic needs are the needs

2Ibid.,p. 5. 31awrence C. Lovejoy, Wage and Salary

Administration, p. 335.

-9-

for recognition, belonging, security, and a feeling of

adequacy. By rewarding the more productive worker for

his superior effort through a wage incentive plan, the

worker gains: recognition of his efforts; a feeling

of belonging to a select group of superior workers;

a sense of security in the knowledge that he can expect

certain returns from management £or loyalty and effort;

and, a feeling of adequacy by attaining the standards

set by the wage incentive plan. 4

More simply, the theory of wage incentives

can be seen as an example of the theory of economic

motivation. Reduced to syllogistic form it holds:

"That workers work for monetary reward That for additional remuneration, workers

will increase output That, therefore, a system of pay that

automatically ties earnings to output increases production."5

This logic is considered to be sound. In a

"free enterprise" system, money is the principal

medium of exchange and the main standard of value.

4Ibid., pp. 336-3.37. For further discussion of basic needs and the relation of these needs to wage incentives see William G. Scott, Human Relations in Management, p. 249, and Charles Walter Lytle, Wage Incentive Methods, p. 54. ·

5wolf, 2£• ill•, pp. 72-73.

-10-

Thus, monetary reward is one of the basic motivations

for work and workers sell their productive power to

industrial establishments in order to obtain money.

Not only is money an accepted measure of material

wealth, but it also has an important value as a symbol d . 6 of status an security.

Building upon the concept that wage incentives

are an extension of the theory of economic motivation,

the following basic assumptions of wage incentive plans

can be set forth:

"l) Every worker may be considered as an economic man who will act in the work situation in a manner which will increase the benefits to him.

2} The normal amount of skill and effort required of a job can be measured and compared with other jobs, and this 'normal' can be expressed in quantitative manner as a standard.

3) Under ordinary working conditions, the desire of the economic man, the worker, to increase his monetary income will cause him to work with sufficient vigilance and skill to beat the standard, in order to obtain the added pay to be derived from so doing."7

6~., p. 73. 7Lovejoy, £2• ill•, pp. 335-336.

-11-

Based upon the foregoing theory and assumptions,

the requirements which must be met in establishing a

wage incentive plan may be expressed as follows:

1) A standard of performance, based upon nonnal

output for an acceptable job performer, must be

determined for each job.

2) A minimum pay rate must be established.

3) A method must be established for the

payment of premiums to workers whose level of

production is higher than that of the predetermined

standard.

4) Care must be taken that the standard of

performance provides for both quality and quantity

of production. 8

It should be noted in passing that some of the

major weaknesses of'wage incentive plans and the

source of much management-labor controversy revolve

around the practical application of the aforementioned

requirements. Such weaknesses, as well as the stronger

points of incentive plans, are discussed later in this

chapter.

8Ibid., p. 335.

-12-

It should further be pointed out that wage

incentive plans are designed not only to aid workers

in satisfying basic needs, but also to lower unit

costs of production. In the words of one writer,

"Wage incentives are a managerial tool. Their primary

purpose is to aid in obtaining minimum unit costs,

thereby contributing to enterprise profits." 9 In the

words of another, "The primary and universal reason

for the installation of wage payment plans {i.e.,

wage incentive) is today, as ever, to secure the

lowering of unit costs on the one hand, and to improve 10

the earnings of employees on the other."

C. Types of Wage Incentive Plans

There are many different types of wage incentive

plans, some of which are in use today as well as many

which have been discarded for various reasons.

Discussion of these plans has been handled ¼n different

ways by various authors. Lytle presents his so-called ff • • • • natural classification of all financial

~9 Wolf, .Q.E• ill•, p. 6. 10 Lytle, .2£• ill•, p. 53.

-13-

incentives" in a tabular fonn in which he classifies

these plans by production-earning characteristies. 11

This table contains five classes and some twenty-eight

plans as well as variations on these plans. An

elaboration of the information in this rather detailed

tabulation comprises a large portion of Lytle's text.

J. K. Louden in his book, Wage Incentives,

recognizes the number and complexity of plans in

existence and confines his summary to five types

of plans which, in his words:

" •••• probably, at least in their funda-mentals, represent the vast majority of incentive plans now in force. They are:

1. Straight Piece Work. 2. The Hour-for-Hour or 100 Per

Cent Bonus Plan. 3. The 50-50 Premium Bonus Plan

{Halsey). 4. Point Plans Typified by the

Bedaux System. 5. Measured Day Work."1 2

11Lytle, .2.E• ill•, pp. 126-127. 12 J. K. Louden, Wage Incentives, pp. 37-38.

-14-

. 13 14 Other authors, among them Jucius, Wolf, and

Kennedy15 discuss various wage plans selected as

representative of all wage plans. Further reading

of their works as well as those of Lytle and Louden

reveal that there are certain types of wage incentive

plans held to be basic and representative by all of

them.

In this chapter an attempt will be made to discuss

types of wage incentive plans which are representative

of the more general variations in such plans.

Daywork

Although not an incentive plan, daywork or the

time wage plan is mentioned here because it serves as

a standard or a control method against which the

various types of incentive plans, discussed below, may

be contrasted.

The term "dayworku may be used to refer to all

time payment plans used in paying workers, although

13Michael J. Jucius, Personnel Management, pp. 384-393.

14wolf, .2.E• cit., pp. 10-16. 15van Dusen Kennedy, Union Policy and Incentive

Wage Methods, pp. 34-39.

-15-

the hour is the time unit most commonly employed. Thus,

by multiplying the number of hours worked by the rate

per hour, the 'worker's wages are easily computed as 16 follows:

HxR=W H-hours actually worked R-rate per hour in dollars W-wages earned

The daywork plan can be readily adapted to include

extra payment to an employee who works overtime by

using either of the following formulae which allow £or

payment of 150 per cent of the worker's hourly rate

(ofien called "time and one half") £or overtime hours

worked:

(H x R) + (H0 X R) 50% = W

(Hn x R) + (Ho x R) 150% = W

Measured Daywork

H-total hours worked Hn-nonovertime hours H0 -overtime hours W-wages earned R-rate per hour in dollars

Under the measured daywork plan wages are computed

as they are under the daywork plan, but hourly rates are

revised periodically in accordance with measures of the

particular worker's qualifications and efficiency.

16~: All formulae used in this chapter are adapted from Jucius, .9.:e. ill•, pp. 384-393.

-16-

Jucius uses the following four-step explanation of the

plan: 111. The base rate for each job is care-

fully established by means of job evaluation.

2. A table of values is prepared to show the percentage to be added to the base rate on each job because of varying degrees of personal per-formance in regard to productivity, quality, dependability, and versatility.

3. Each worker is rated periodically (practice varies the period from three to six months) on his productivity, quality, depend-ability, and versatility.

4. Each worker is then paid during the next work period at the base rate plus the percentage as determined by his rating and the table of values."17

Since, under this plan, the more efficient worker,

i.e., the worker who is rated more productive, will be

paid at a higher rate, measured daywork plans offer

an incentive to the worker to be more efficient and,

thus, are true wage incentive plans as opposed to

straight time or daywork plans.

-17-

Piecework

Piecework is probably the oldest and most generally

used incentive plan in use. 18 This plan provides for

payment to workers of a constant price per unit of

output. This price per unit of output or price per

piece of output is known as the "piece rate." Thus,

the worker's wage is computed simply by multiplying

his total units of output by the piece rate using the

following or a similar formula:

N x U = W N-number of units produced U-rate per unit in dollars

(piece rate) W-wages earned

Frequently, a variation of this plan, called

"guaranteed piecework" is employed. This plan

guarantees to the worker a minimum hourly rate of pay.

It can be seen that at low levels of output at which

the piece work wages would consistently be below the

guaranteed minimum hourly wage, the plan becomes a

daywork plan.

18Ibid., p. 387; Louden, .Q:e• ill•, p. 38; Wolf, .2.12.• cit., p. 11; Kennedy, .2.E• cit., p. 35.

Obvious advantages of piecework plans are the

incentive value, simplicity of calculation, and easy

understandability. Difficulties lie in establishing

the piece rates and keeping them equitable in the face

of changes in .the value of money, and changes in

technology, which make greater output more readily

attainable.

Some of the better known piecework plans, which

differ in some way from the general type discussed

above are the Taylor Differential Piece Rate Plan,

the Merrick Multiple Piece Rate Plan, and the Gantt

Task and Bonus System. 19

Standard Hours Plans

This type of plan, also called Hour-for-Hour Plan

or 100 Per Cent Bonus Plan, differs from piecework only

in that the standards are expressed in time per unit

of production rather than in pieces of work produced.

Under a standard hours plan the worker is paid at his

established hourly wage for all standard hours of work

19For discussion of these plans, see Wolf, ..Qll. cit., pp. 14-15; Jucius, .2.£• cit., p. 389, and Lytle, .2,2. cit., pp. 177-181, 185.

-19-

he produces, regardless of the time he actually takes

to complete the work. Thus, £or example, the worker

who undertakes a job for whiah five standard hours

are allowed and completes the job in three hours will

receive earnings 0£ five times his hourly rate of pay.

He would have received the same earnings had he taken

two, £our, or six hours to complete the job. The

number of standard hours allotted to specific jobs

are pre-established by time study methods.

The £act that the worker receives 100 per cent

of any bonus earned by satisfactorily completing a

job in less time than the standard hours allotted is

the feature which distinguishes this type of plan from

the sharing plans described below.

Sharing Plans

This type 0£ wage incentive plan provides that

the employer and the worker share the savings in direct

labor cost which results from above-standard output.

The worker's wages under this type of plan can be

computed by the following formula:

(H x R) + [(& - H) R]P = W ff-hours actually worked R-rate per hour in dollars $-standard time P-percentage W-wages earned

-20-

By way of illustration, if the percentage (P)

were 50 per cent and if the worker took three hours to

complete a job with a standard of five hours (as in the

standard hours plan example) his wage or earnings (W)

could be computed by the formula to be 4 R or four

times his hourly rate. Under the standard hours plan

this same worker would have received five times his

hourly rate or 100 per cent of the bonus for the two

hour's time which he saved on this job.

The percentage (P} of the savings which accrues

to the worker varies. Quite frequently the sharing is

on a 50-50 basis giving rise to the name "50-50 Premium

Bonus Plan" as used by Louden. 20 Another variation,

the 100 per cent premium plan is identical with the

standard hours plan discussed above. 21

The best known sharing plan is the Halsey Plan

or Halsey Premium Plan, named after the man who

pioneered this type of plan. Another well-known

sharing plan is the Rowan Plan which differs from

the plan above in that the workers receive a decreasing

201ouden, .2£· ill·, p. 47. 21w· olf · t 12 ' .212.• £.L•' p. •

-21-

share of the savings as their rate of output increases.

Still another well-known sharing plan is the Bedaux

Point Premium Plan under which the time standards are

expressed in minutes, which are known as "B's," instead

of being expressed in hours. 22

Group Plans

In addition to the above-mentioned types of plans

which have been directed largely at remunerating each

individual on the basis of his own efforts, plans may

be placed upon a group basis. Earnings of individuals

are thus determined by prorating the bonus or premium

produced or earned by the group. This type of plan is

desirable for situations in which individual WiOrkers

are highly dependent upon one another for their output,

or where the output of individual workers is not easily

distinguished and measured.

22For a discussion of these plans, see Wolf, .2.E• ,ill., pp. 11-14; Jucius, .2.E· cit., pp. 389-392; Louden, ..2..2• cit., pp. 41-43; Kennedy, .21?.· cit., PP• 37-3~ ancrLytle, .2.E• ill•, pp. 202, 255"; 224.

-22-

D. Advantages of Wage Incentive Plans Versus

Problems Incurred in Their Application

Advantages of Wage Incentive Plans

A wage incentive plan which has been properly

designed, installed, and administered by management,

and is accepted by the workers covered by the plan,

has numerous advantages. Such a successful installa-

tion of a wage incentive plan is dependent upon good

engineering method studies (i.e., time and motion

studies) which are essential to the setting of

equitable standards of output and the maintenance 23 of an acceptable wage structure. ·

The advantages to be enjoyed from use of a wage

incentive plan accrue to both management and workers.

Some of the more important advantages which accrue

to management may be summarized as follows:

l) More efficient plant operation through

standardization of methods and costs.

2) Realization of increased production through

improved methods and stimulated worker productivity.

23The scope of this thesis does not warrant an explanation of time and motion studies, and other techniques of work measurement.

-23-

3) Reduction of unit costs through greater

utilization of facilities and more efficient worker

effort.

4) Opportunity to provide a product at a more

attractive price which results in increased market

potentialities.

The outstanding advantages which accrue to

workers are somewhat more obvious and may be outlined

briefly as follows:

l) The application of sound engineering methods

study, which serves as the basis for installation of a

wage incentive plan, results in improved work methods

and working conditions.

2) Wage incentive plans provide for compensation

of workers for increased productivity.

3) Workers can realize increased earnings and

greater purchasing power through greater productivity.

4) Wage incenti~e plans enable a worker to more

easily satisfy his basic needs as discussed in the

first part of this chapter. 24

24Lionel B. Michael, Wage and Salary Funda-mentals and Procedures, pp. 235-239.

-24-

Problems Incurred in Application of Wage Incentive

Plans

The actual operation of wage incentive plans may

involve numerous problems. For the most part, however,

the more common problems are of two types: problems

involved in setting standards of output, and problems

concerned with the maintenance of an acceptable wage

structure. 25

When management chooses. to install a wage

incentive plan it is usually with the advice of

industrial engineers. If such a plan appears to be

technically sound, management often assumes that the

workers should accept it and that the aforementioned

advantages of wage incentive plans will accrue to both

management and workers. It is not enough, however,

for a wage incentive plan to be technically sound.

In order to operate smoothly the plan must not only

sound, but the workers must believe it to be sound.

Some of the workers' more prevalent beliefs

which make application of wage incentives difficult

are:

25wolf, 2£• ill•, p. 24.

-25-

1) A belief that many wage incentive plans are

too complicated, thus, lessening the workers' confidence

in the plans.

2) A conviction that standards are set unfairly,

by using unusually fast operators and selecting the

shorter times to be used in computing the standard.

3) The fear of management's cutting of rates or

ordering a "speed-up" if workers make good earnings

after a rate is established.

4) A belief that the opinions and feelings of

workers are not considered by timestudy men and other 26 management personnel who set standards and rates.

26Paul Pigors and Charles A. Myers, Personnel Administration, pp. 388-390.

-26-

CHAPTER III

METHODOLOGY

A. Collection of the Data

Selection of the Sample

A random stratified sample of manufacturing

plants within the state of Virginia was selected from

the Directory of Virginia l'vfanufacturing and Mining,

published by the Virginia State Chamber of Commerce,

1961-62.

The twenty classifications of manufacturing

industries, established by the U.S. Department of

Commerce and used in the Directory of Virginia l

l'vfanufacturing and Mining were selected for sampling.

It was decided that the sample would consist of

approximately JOO firms. It was reasoned that a

sample of this size would insure a return of enough

questionnaires from each industry classification to

be representative of all manufacturing concerns

throughout the state of Virginia.

1see Appendix B for a list of these industry classifications.

-27-

Using the Directory of Virginia Manufacturing

and Mining, the number of firms having 50 or more

employees was determined for each of the 20 manufac-

turing classifications. This number was then used to

determine the approximate portion of questionnaires

which would be sent to firms within each industrial

classification. The following formula was used:

X =-

275

Nx = Number of firms in each classification with 50 or more employees.

Nt = Total number of firms in all 20 classifications with 50 or more employees.

X = Proportionate number of questionnaires for each classification.

The number 275 was used in the formula to allow

additional questionnaires to be sent to plants in the

smaller industrial classifications. It was reasoned

that this practice would improve the chances of a

representative return of questionnaires from the less

populous classifications. In addition, the number of

questionnaires sent to plants in the larger classifica-

tions was, in some cases, reduced as it was believed

that the number arrived at by using the formula, above,

-28-

was larger than was needed to result in a significant

sampling of the plants in these industries. The

resulting number of plants selected for sampling

was 294.

The selection of the individual plants to which

questionnaires were sent was made in a random manner.

Some slight adjustments were made to assure a more

even selection of plants from the various industrial

sub-classifications.

Design of the Questionnaire

The questionnaire consisted entirely of multiple 2

choice questions. Multiple choice questions were used

in order to facilitate the comparison of answers and the

drawing of conclusions from these answers, as well as

to encourage plants to respond to the survey.

The questionnaire had four major sections. The

first of these four sections was a listing of the twenty

manufacturing industry classifications and their

corresponding number according to the U. S. Department

of Commerce as taken from the Directory of Virginia

Manufacturing and 1\.li.ning.

2A copy of the questionnaire in its entirety is presented in Appendix B.

-29-

The second of the four sections, entitled

Section I: General Information, contained five

questions designed to determine: 1) how long the

plant had existed; 2) the number of employees of

the plant, 3) the number of hourly (non-salaried}

workers, 4) whether or not these workers belonged

to a union and, if so, how many belonged; and,

5) whether or not the plant employed a wage

incentive plan of remuneration for hourly workers.

The remainder of the questionnaire was keyed to

the answer to the fifth and last question in Section I,

i.e., whether or not the plant employed a wage incentive

plan. If the answer to this question was "no," the

respondents were instructed to answer the questions in

Section II. If the answer to this question was "yes,"

the instructions were to answer the questions in

Section III.

Section II, with the heading, "TO BE ANSWERED IF

PLANT DOES NOT PRESENTLY EMPLOY A WAGE INCENTIVE PLAN" - ' was designed to cover two possibilities, the first

being that the plant might have discontinued use of

a previously employed wage incentive plan, and the

second being that the plant had never employed such a

-30-

plan. The first question asked whether or not the

plant had employed a wage incentive plan in the past.

If the answer to this question was "yes" the second

question asked why the use of a wage incentive plan

was discontinued and the third question asked how long

it had been discontinued.

If the plant had never employed a wage incentive

plan, the fourth question asked why the plant had

never done so.

Section III had the heading, "TO BE ANSWERED

IF PLANT~ Ell/IPLOY A WAGE INCENTIVE PLAN." The four

questions in this section were designed to determine:

(1) why a wage incentive plan was instituted;

(2) how long the plan had been in effect; (3) what

percentage of hourly workers were remunerated under

such a plan; and, (4) what types of wage incentive

plans were employed.

The last six questions were designed to determine

the degree to which the use of a wage incentive plan

had influenced such factors as: the earnings of

workers, quantity of production per man hour, quality

of work produced, unit labor costs, and turnover and

absenteeism of hourly workers covered by such a plan.

-31-

Distribution of Questionnaires

A brief letter of explanation 3 was enclosed with

each questionnaire. The letter explained the purpose

of the questionnaire and stressed the fact that no

attempt was being made or would be made to identify

any responses from individual plants.

Each questionnaire was marked to indicate the

industrial classification of the plant to which it was

being sent. 4 The questionnaire was then mailed along

with a copy of the letter of explanation and a stamped

envelope addressed to the author.

B. Analysis of the Data

Upon their return, the completed questionnaires

were divided according to whether the plant does or

does not employ a wage incentive plan. Those plants

indicating that they do not employ wage incentives

3A copy of the letter is contained in Appendix A.

½he section concerning the plant's industrial classification was marked in advance in order to eliminate the possibility of its being erroneously marked or neglected which would have rendered the questionnaire useless for purposes of analysis.

-32-

were further divided as to whether or not the plant

employed such a plan in the past.

Frequency and percentage distributions were

compiled for each of the questions and put into

tabular fonn (see Chapter IV and Appendix C). The

data in these tables were then used to provide

answers to the questions posed in Chapter I.

-33-

CHAPTER IV

RESULTS OF THE SURVEY

A. Introduction

One hundred and seventy-seven (60.2 per cent) of

the 294 manufacturing plants to which questionnaires

were sent responded to the survey. Information from

167 of the 294 questionnaires was tabulated,

representing 56.8 per cent of the plants surveyed.

Ten of the questionnaires returned were not usable.

Five were returned unanswered and five were discarded

because they were incorrectly and incompletely

answered. 1

For purposes of analysis and discussion the

information from the completed questionnaires was

divided into the following major categories:

1) General characteristics of responding firms;

2) Information concerning those plants employing a

wage incentive plan or plans; and, 3) Information

concerning those plants not employing a wage incentive

plan or plans.

1see Table 20, Appendix c.

-34-

The tabulations in this chapter and in Appendix C

may appear to be mathematically incorrect since totals

of the various tabulations are not, in some instances,

consistent. This situation exists because: some of

the plants are engaged in more than one industry; some

of the questions have more than one answer; and, a

number of the questionnaires were not completely

answered.

In addition to the results tabulated and discussed

in this chapter, Appendix C contains some less relevant

information concerning the plants surveyed.

B. General Characteristics of Responding Plants

Length of Operation

From Table 1 it is easily seen that many of the

responding, plants (61.7 per cent of the tabulations)

in the various industry classifications have been in

operation for over 25 years. However, the Apparel (23),

and Electrical Machinery (36) industries appear to have

relatively newer plants than other industries surveyed.

Use of Wage Incentive Plans

The industry classifications Textile Mill

Products (22), Apparel and Other Finished Products,

-35-

Table 1. Comparison of General Information Concerning Plants in Different Industrial Classifications

Number of Years Plant in Use of Wage Operation Incentive

Plan

I.('\

N -:r °' I.('\

ri ri N M I.('\ °' I I I (l) Cl)

I I 0 I.('\ 0 > Q)

ri I.('\ ri ri N 0 :>-i

20 0 0 3 3 3 15 1 23 21 0 0 1 0 0 7 2 6 22 0 0 2 2 1 10 14 1

i=: 23 1 2 2 2 2 5 12 ·2 0 24 0 1 1 4 1 12 5 14 ·r-1 +,) 25 0 1 0 2 0 6 4 5 ctl 0 26 0 1 1 0 0 8 6 4 ·r-1 27 0 1 0 1 0 5 1 6 +-I ·r-1 28 0 1 2 0 0 7 0 10 Cl) Cl) 29 0 1 0 0 0 0 0 1 ctl 30 0 1 0 1 0 1 0 3 ri 0 31 0 0 0 1 0 5 2 4 >. 32 0 1 0 3 1 7 2 10 M 33 0 0 0 0 0 6 5 1 +,) Cl) 34 0 0 1 1 1 13 5 11 ::::i "O 35 0 0 1 2 1 2 3 3 i=: 36 0 3 1 0 0 0 l 3 H

37 0 2 0 0 0 3 1 4 38 0 1 1 0 1 1 4 0 39 0 1 1 1 1 3 3 4

-36-

etc. (23), Primary Metal Industries (33), and

Professional, Scientific, and Controlling Instruments,

etc. (38), employ wage incentive plans very exten-

sively whereas those industries using wage incentive

plans very little are: Food and Kindred Products (20),

Lumber and Wood Products, etc. (24), Printing,

Publishing, and Allied Industries (27), Chemicals

and Allied Products (28), Rubber and Miscellaneous

Plastics Products (30), Stone, Clay, and Glass

Products (32), and Fabricated Metal Products, etc.

(24) (see Table 1).

Number of Hourly Workers

Table 2 shows that a preponderance of the

responding plants have 100 to 500 hourly workers.

The Food and Kindred Products plants (20) have widely

varying numbers of hourly workers.

The larger respondents, i.e., those plants with

greater numbers of hourly workers, employ wage

incentive plans more extensively than do the smaller

plants (Table 3). The responding plants with larger

numbers of hourly workers also exhibit a greater

tendency to be unionized (Table 3).

-37-

Table 2. Comparison of Answers by Respondents with Different Numbers of Hourly Workers

Number of Hourly Workers

0 0 0

0' 0' 0 0 0' 0' 0 ,-f

0' ...:t 0' ,-f ...:t ,-f ...:t ...:t t--- 0' I I I S.. N I I I 0 0 0 Q) I I,(\ 0 I,(\ 0 0 0 >

0 N l,l'\ t--- ,-f N I,(\ 0

20 3 4 5 2 4 4 l 1 21 0 0 1 0 4 4 l 4 22 0 0 1 0 4 4 1 4

s:: 23 1 0 0 1 5 6 1 0 0 24 0 1 2 6 4 5 0 1 •r-f .µ 25 0 0 0 0 1 5 l 1 "' 0 26 0 1 1 l 2 2 l 1 •r-f 27 0 0 0 0 2 4 0 0 f:t..t •rl 28 0 2 0 0 2 3 l 2 ti) (I) 29 0 0 0 0 1 0 0 0 "' ,-f 30 0 0 0 0 l 0 1 0 0 31 0 1 0 0 1 2 2 0 >. 32 0 1 l 0 6 2 2 0 S.. .µ 33 0 0 0 0 3 l l 1 fl) 34 1 l 0 0 g 3 1 l ::::s "'d 35 0 0 0 0 2 1 1 2 s::: H 36 0 0 1 l 0 2 0 0

37 0 0 0 1 1 l 0 2 38 0 l 0 0 1 0 2 0 39 0 1 0 l l 2 2 0

-38-

Table 3. Comparison of Answers by Respondents with Varying Numbers of Hourly Workers

Number of Hourly Workers

0 0 0

°' °' 0 0 °' °' 0 r-1

°' -:t °' r-1 ....::t r-f ....::t ....::t c--- °' r I I J.. C\l I r r 0 0 0 Q) I "' 0 lt\ 0 0 0 > 0 N lt\ c--- r-1 C\l lt\ 0

Wage Incentive Plan

Yes 0 2 4 5 16 17 17 7

No 5 11 8 9 29 25 7 7

Union

Yes 1 8 2 5 22 21 9 10

No 3 5 10 9 22 19 5 4

-39-

Union Versus Non-Union

Of those respondents answering the questions

concerning unions, 79 plants have unions and SO plants

do not have unions (Table 4). In the same vein, 28

unionized plants have wage incentive plans as opposed

to 30 non-union plants, and 51 unionized respondents

do not have wage incentive plans compared with 50

non-union respondents which do not employ such plans.

Thus, it would appear that labor unions may have little

effect upon the use of wage incentive plans. This

subject will be discussed further, however, in part C

of this chapter.

Union representation of hourly workers is rather

evenly distributed among the 20 industry classifica-

tions, although there is a slight predominance of

unionized respondents in the Paper and Allied Products

(26), Chemicals and Allied Products (28), Primary

Metal Industries (33), Fabricated Metal Products, etc.

(34), and Machinery, Except Electrical (35) classifica-

tions (Table 5). Of greater significance, perhaps, is the fact that

unionization of hourly workers tends to be strongest

among those respondent plants which have been in

Table 4.

Wage Incentive

Plan

Number Years Plant Has Been in

Operation

Number of Hourly Workers

-40-

Comparison of Answers by Union Versus Non-Union Respondents

Union Non-Union

Yes 28 30

No _a _j_Q

Total 79 80

1-5 0 l

5-9 5 10

10-14 4 10

15-19 10 11

20-25 2 6

over 25 58 42

0-24 1 6

25-49 8 5 50-74 2 10

75-99 5 9

100-199 22 22

200-499 21 17

500-1000 9 5 over 1000 10 4

Table 5.

s::: 0 •r-i +> c,j C) ·r-1 4-4 •r-i fJl C/l c,j ,-f 0

>. r... +> (I)

"d s:::

H

-41-

Comparison of Answers by Union Versus Non-Union Respondents

Union Non-Union

20 9 15 21 5 2 22 5 9 23 5 8 24 7 10 25 4 4 26 7 2 27 3 J; 28 7 3 29 l 0 30 2 l 31 2 4 32 6 5 33 5 l 34 11 4 35 5 l 36 0 4 37 3 2 38 2 2 39 4 3

-42-

operation the longest time. This is particularly true

of plants which have been in operation for over 25

years (Table 4). 2

C. Plants Not Employing Wage Incentive Plans

One hundred and seven (64.l per cent) of the 167

manufacturing plants returning usable questionnaires do

not employ wage incentive plans. Of these 107 plants,

87 have never employed a wage incentive plan of

remuneration and 20 have discontinued the use of

such a plan or plans at some time in the past.

Reasons Plants Have Never Employed Wage Incentive Plans

The reasons responding plants have never employed

wage incentive plans of remuneration are summarized in

Table 6.

It can readily be seen from Table 6 that reasons

3 and 4, having to do with the use of constant-speed

machinery and difficulty in measuring the production

of individuals, are the most predominant conditions

which prevent the use of wage incentive plans. These

2some additional information concerning unionization of respondents may be found in Table 22, Appendix C.

-43-

Table 6. Reasons Plants Have Never Employed Wage Incentive Plans

Reasons

1) Management opposed to use of wage incentive plan

2) Union opposed to use of wage incentive plan

3) Rate of production of hourly workers is determined by constant-speed machinery and, therefore, wage incentive plans are not applicable

4) Production of individual workers is not readily measurable and, therefore, wage incentive plans are not applicable

5) Workers (or union) have not asked for such a plan and appear to be content without it

6) Other

Total*

Number of Responses

6

32

49

18 8

121

Per Cent of Total

6.6

5.0

26.4

40.5

14.9

6.6 100.0

*The total number of responses is greater than the total number of respondents because plants surveyed were requested to give all applicable answers and, in some cases, more than one response was applicable.

-44-

two reasons represent 26.4 per cent and 40.5 per cent,

respectively, of the responses.

Of the other reasons given approximately the

same number of respondents indicate management

opposition (8) and union opposition (6) as being

responsible for never instituting a wage incentive

plan.

Tables 22, 23, and 24, in Appendix C, contain

comparisons of answers given by plants having

different reasons for not employing a wage incentive

plan. These tables, however, do little more than

substantiate the observations made above.

Reasons Plants Have Discontinued Use of Wage Incentive

Plans

The reasons given by responding plants for

discontinuing use of wage incentive plans are shown

in Table?.

Of the reasons given by the 20 plants which have

discontinued the use of wage incentive plans the third

and fourth responses in Table 7, having to do with a

change to a type of work to which such plans were no

longer applicable and a change from worker-paced to

machine-paced work, constitute roughly one-third of

-45-

Table 7. Reasons Plants Have Discontinued Use of Wage Incentive Plans

Reasons Number of Per Cent Responses of Total

1) Management opposed continuance of wage

6 incentive plans 17.l

2) Union opposed continuance of wage incentive plans llo4

3) Nature of work changed so that wage incentive plans were no longer applicable to type of work done 7 20.0

4) Work changed from worker-paced to machine-paced work 5 14.3

5) Quality of work decreased 8.6 under wage incentive plan 3

6) Work standards and/or incentive rates were not acceptable to workers 2 5.7

7) Work standards and/or incentive rates were not acceptable to union l 2.9

8) Work standards and/or incentive rates were not acceptable to management 1 2.9

9) Other 6 17.l

Total 35 100.0

the answers. These reasons are rather consistent with

the predominant reasons for not instituting wage incen-

tive plans in the first place, as discussed above.

Fourteen of the 20 plants which had discontinued

wage incentive plans have union representation of

hourly workers. 3 This fact might seem to indicate

that labor unions discourage the use of wage incentive

plans. However, the fact that more of these plants

cited management opposition (6 respondents) than union

opposition (4 respondents) to such plans as a reason

for discontinuing their use contradicts the view that

unions oppose wage incentive plans. Both of these

observations still leave room for the thought that

management may be more reluctant to offer wage

incentives to hourly workers who are being bargained

for by a labor union.

Tables 25 and 26, Appendix C, contain supplemental

information concerning the discontinuance of wage

incentive plans.

3see Table 24, Appendix c.

-47-

D. Plants That Do Em2loy Wage Incentive Plans

Of the 167 plants for which questionnaires were

tabulated, 60 replied that they employed wage incentive

plans of remuneration for hourly workers. This number

represents 35.9 per cent of the plants returning

usable questionnaires.

Reasons Plants Emeloy Wage Incentive Plans

Table 8 shows the reasons manufacturing plants

gave for employing wage incentive plans.

The predominance of response number 3, i.e., that

management sought to improve production by instituting

a wage incentive plan, was such as to almost exclude

all other responses (Table 8). Of the 60 responding

plants using such plans, 93.3 per cent gave this

particular reason for their use.

Tables 9-12 show comparisons of responses by

plants having the different reasons for employing wage

incentive plans.

The majority of the wage incentive plans employed

by respondents have been used for more than five years

and many have been in use longer than 20 years (see

Table 9).

-48-

Table 8. Reasons Plants Employ Wage Incentive Plans

Reasons Number of Per Cent Responses of Total

1) Union bargained for a wage incentive plan 1 1.7

2) Non-union workers requested such a plan 0 o.o

3) .Management sought to improve production by

56 instituting such a plan 93.3 4) Other 3 5.0

Total 60 100.0

-49-

Table 9. Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

*

.j.l s:::: s:::: 0 crt •r-f r-f .j.l tl. ctS

S.. ti) Q) S-i P. ctS 0 Q) :>-I

1-5

5-9 10-14

15-19

20-25

over 25

Totals

a> 0-2 >-o ·r-f Q)

+l 00 2-5 s::: :::, Q)

g; 5-10 HQ)

i:'Cl ~Cl) 10-15 crt crt :s: ::i::: 15-20 Cl) s::::

over 20 Q) tl. :>-I

Totals

Reasons Wage Incentive Plans Used* l 2 3 4 Totals

0

0

0

0

0

l

1

0

0

1

0

0

0

1

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

7

5 g

4

30

54

0

3

16 11

9

16

55

0

0

l

l

0

2

4

0

0

0

1

l

2

4

0

7

6

9

4

33

0

3

17 12

10

1g

Legend for Tables 9, 10, and 11. 1 - Union bargained for a wage incentive plan. 2 - Non-union workers requested such a plan. 3 - Management sought to improve production by

institution of such a plan. 4 - Other

-50-

Forty-seven (7S.3 per cent) of the 60 plants

using wage incentive plans remunerate 50 per cent or

more of their hourly workers under such plans.

Twenty-nine plants, or 4S.3 per cent of the same

60 plants, remunerate 70 per cent or more of their

hourly workers under such plans (Table 10).

Nearly one-fifth (11 plants or 1$.J per cent)

of the plants offering wage incentives have fewer

than 100 hourly workers while 27 of these plants (45 per cent) have less than 200 hourly workers (Table 10).

Of the 58 plants with wage incentive plans that

answered the question as to whether or not their hourly

workers had union representation 28 answered "yes" and

JO answered "no" (Table 11). This ratio of union to

non-union plants represents an almost precise division

and is consistent with the results for plants not

using wage incentive plans. 4

The three plants, using wage incentive plans,

that did not select answers number 1 or number 3, above (indicating union or management influence,

respectively) s,eemed to concur in crediting management

with the institution of such plans by answering:

4see Part C of this chapter.

-51-

Table 10. Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

Reasons Wage Incentive Plans Used* 1 2 3 4 Totals

0-9% 0 0 1 0 1 Cl)

10-19% 0 0 4 0 4 M (I) (l)

bO 20-29% s~ 0 0 2 0 2

;3l: i::: M<t1 30-39% 0 0 3 1 4 >, (I.) ,-f

,-f "O ll., MS::

40-49% 0 0 2 0 2 ::s :::> (I) 0 > ::r:: "O ·r-1

50-59% Q) +> 1 0 9 0 10 4-4 +> s:: O(lj(I)

MO 60-69% 0 0 8 0 8 +> (I.) i::: S:: i:::H Q) ::s os

(I) 70-79% 0 0 5 1 6 Mil::

6 Q) 80-89% 0 0 5 1 ll.,

90-100% 0 0 16 1 17

0-24 0 0 1 0 l

>, 25-49 0 0 2 0 2 ,-f M 50-74 0 0 3 1 4 ::J 0 ::r:: (I)

75-99 0 0 4 0 4 M 4-4 (l) 0~

0 16 S.. 100-199 0 0 16

200-499 0 0 14 2 16 ::s z 500-1000 0 0 7 0 7

over 1000 l 0 6 l 8

* See Legend, Table 9.

-52-

Table 11. Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

Reasons Wage Incentive Plan Used*

l 2 3 4

Yes 1 0 25 2 Union

No 0 0 zg 2

Cl) 0-24 0 0 0 0 $.i (1) 25-49 0 0 2 0 i

50-74 0 0 3 0 s::: 0 75-99 0 0 l 0 •r-i s::: :::, 100-199 0 0 9 2 0

200-499 0 $.i 0 6 0

(1)

1 500-1000 l 0 l 0 z over 1000 0 0 2 0

* See Legend, Table 9.

-53-

"Wage incentive was instituted by management

when plant was first put into operation, following

example and experience in parent organization."

rrTo offer greater earnings potential for

employees and increased production."

"This plant has always been under a piece work

plan."

Because of the almost exclusive selection of one

answer by the respondents having wage incentive plans,

a comparison of industrial classification of plants

with different reasons for using wage incentives

(Table 27, Appendix C) reflects little more than the

information found in Table 1.

Types of Wage Incentive Plans Used

A question pertaining to the types of wage

incentive plans employed by manufacturing plants

within the state of Virginia, was included in the

questionnaire in an effort to determine two things:

l) the extent to which the various types of plans

are used; and 2) the number of workers covered by

each type of plan. 5

5section c, 4, Appendix B.

-54-

Because of the manner in which this question

was answered it became impossible to determine the

number of workers remunerated under the various types

of plans. 6 However, tabulations were compiled which

compare answers given by plants employing the different

types of wage incentive plans (Tables 13-15).

The types of wage incentive plans used by the

plants returning usable questionnaires are indicated

in Table 12.

Daywork (a plan of remuneration whereby a

worker's pay is based on the time he has worked) was

included on the questionnaire but is not tabulated

in Table 12 since it was obvious from the returned

questionnaires that many of the respondents ignored

this particular type and only indicated wage incentive

plans used.

Piecework is the type of wage incentive plan used

most often, being employed by 58.3 per cent of the 60

plants using wage incentives. A somewhat similar plan,

standard hours piecework, is the second most popular

plan, being used by 25.0 per cent of the respondents

offering wage incentives.

6Many plants failed to indicate the number of workers covered by the different plans, while others gave percentages instead of numbers.

-55-

Table 12. Types of Wage Incentive Plans Employed by Respondents

Type of Plan Nwnber of Plants Per Cent

1) Measured daywork (wage determined by efficiency of workers)

2) Piecework (pay based on units of output)

3) Standard hours piecework (standard hours per unit produced)

4) Sharing plan (pay based on a percentage of time saved on a job)

5) Group incentive plan

6) Other

Total

Using Plan of Total

35

15

0

8

2

6$

11.8

51.5

22.1

o.o 11.8

2.9

100.0

-56-

Piecework and standard hours piecework plans

appear to be somewhat older plans than the other types

(Table 13), but this may be attributable to the fact

that most of the responding plants using wage incentive

plans have been doing so for some time (see Table 9). Standard hours piecework appears to be more

prevalent in plants with unionized hourly workers

(Table 13). None of the other types of incentive

plans appear to show any correlation between frequency

of use and union representation, with the possible

exception of piecework. Although it can be seen from

Table 13 that plants with union representation employ

piecework plans less often than non-union plants, this

is probably due to the fact that piecework is used

rather extensively in the Textile Nfi.11 Products (22)

and Apparel, etc. (23) industries (see Table 15).

These industries have relatively few plants with

union represented workers (see Table 5). Piecework is the only type of wage incentive

plan used by the respondents to remunerate less than

half of their hourly workers (Table 14). It can be

seen from Table 14 that piecework is used to remunerate

from zero to 100 per cent of a plant's hourly workers.

-57-

Table 13. Comparison of Answers Given by Plants Employing the Different Types of Wage Incentive Plans

Q) > Q) m> ::i:: •r-1

+> fJl s:: M a> ctl 0 Q) s:: s::: l>-f H ctl

r-1 4-t Q) ti.. 0 bO

M Q) ..0 "d §~ z

0-2

2-5

5-10

10-15

15-20

over 20

Totals

Yes

No

Totals

Type

"d Q) ...1:4 s~ :~

0

l

4

l

l

1

8

3

4

7

of Wage Incentive

...1:4 M 0 Q) 0 Q) ·r-1

0

0

9

9

4

13

35

13 20

33

...1:4 M 0

cd "d fJl Q) S:: M o Cl1 ;j Q) +:I O •r-1 Cl) ::i::

0

0

4

4

5

3

16

10

5

15

bO i:::

·r-1 M S:: cd cd ~r-1 Cl) ti..

0

0

0

0

0

0

0

0

0

0

Plan Q) >

•r-1 +:I s::: Q) 0 s:::

H

0

l

3 l

2

l

8

4

4

8

Used

Sot Q)

8

0

l

l

0

0

1

2

0

2

2

Total

0

3

21

15

12

18

30

35

-58-

Table 14. Comparison of Answers Given by Plants Employing the Different 'I'ypes of Wage Incentive Plans

Type of Vlage Incentive Plan Used

"C Q) "O f-1 "O > Q) 0 H 0 b.O ·rf H H :s ctl :s s::: +:> ::Jo Q) "d Ol a> ·r-1 P. s::: f-1

C) S:: H o HS::: ;;j (].) (].) (].) ctl ::J Q) ctl ctl 0 CJ ..s:: Total a> m •rf +' 0 •rf ..s:: r-1 H S::: +:>

:80 A-. Cl) ::r: A-. Cl) OH 0

l>, 0-24 0 0 1 0 0 0 1 r-1 H 25-49 0 0 1 0 1 1 3 ;;j 0 50-74 1 2 1 0 0 0 4 ::r: U) 75-99 0 4 1 0 0 0 5 H 4--i (].) 100-199 3 10 4 0 l 0 18 0~

>-I 200-499 2 10 3 0 3 1 19 Ho 500-1000 1 4 2 0 0 0 7 Q) :s: ,B over 1000 1 4 §

2 0 3 0 10 z Totals 8 32 15 0 s 2

Q) 0-9~h 0 1 0 0 0 0 1 l>."d > 10-19% 0 4 0 0 0 0 4 r-1 0) •rf >-I .f...) +:> 20-29% 0 2 0 0 0 0 2 ;j cu s:: OH a> 30-39% 0 4 0 0 0 0 4 ::r: (I) C) 40-49% 0 2 0 0 0 0 2 s:: s:: 4--i ::J H S::: 50-59% 2 5 3 0 3 0 13 0 S m

Q) (I) .--I 60-69% 1 5 2 0 0 0 8 .f...) P::! b.O A-. 70-79% 1 2 4 0 1 0 8 s::: ctl 0) (I) 3 80-897; 2 2 2 0 2 0 8 Of-1

m $.-i 90-100% 2 8 5 0 2 2 19 H O> Q) >-I '"O

0 s:: Totals 8 35 16 0 8 2 :~::::,

-59-

Table 15. Types of Wage Incentive Plans Used by Plants in the Various Industry Classifications

Type of Wage Incentive Plan Used

Industry .!id Q)

Classification 'C H 'C > Q) .!id 0 k 0 b.O •r-i $-i M C\1 µ

H !t Q) 'C Cl) (I) •r-i p,~ 0 ~Mo H ::s Q) Q) (I) C\1 ::s Q) C\1 C\1 00 ..c:

C\1 ·r-i µ 0 •r-i ..c: r-1 H~ µ -~ ri. Cf.) ::r:: ri. Cf.) ri. C,H 0 Total

20 0 1 0 0 0 0 l 21 0 0 1 0 l 0 2 22 l 10 2 0 2 0 15 23 2 11 1 0 1 0 15 24 0 3 l 0 0 l 5 25 l 1 0 0 1 1 4 26 l 2 .3 0 0 0 6 27 0 1 1 0 0 0 2 28 0 0 0 0 0 0 0 29 0 0 0 0 0 0 0 30 0 0 0 0 0 0 0 31 0 2 0 0 0 0 2 32 0 1 l 0 0 0 2 33 0 3 2 0 0 0 5 34 0 4 1 0 0 0 5 35 l 1 2 0 1 0 5 36 1 0 0 0 0 0 1 37 0 1 0 0 0 0 1 38 1 l 1 0 l 1 5 39 l 1 0 0 l 0 3

-60-

A partial explanation of this situation is the fact

that piecework is often used in combination with other

types of plans.

Standard hours piecework is used in plants with

all variations in numbers of hourly workers (Table 14),

as is no other type of plan.

Effects of Wage Incentive Plans in Use

The questionnaire was designed to determine the

effectiveness of the use of wage incentive plans with

regard to the following factors:7

1) Earnings of hourly workers covered by wage

incentive plans.

2) Quantity of production per man-hour.

3) Quality of work produced.

4) Unit labor costs.

5) Turnover of workers covered by such plans.

6) Absenteeism of workers covered by such plans.

The effects that use of wage incentive plans had

upon these six factors, above, will be discussed with

regard to effects of types of wage incentive plans

specifically.

7see Section III, questions 5-10, of the questionnaire, Appendix B.

-61-

1) Effect on Earnings of Hourly Workers. Of

the 60 Virginia manufacturing plants indicating use

of wage incentive plans, 46 plants (76.6 per cent)

reported that incentive payment has increased the

earnings of hourly workers, and only one plant

indicated that its incentive plan has not effected

an increase in earnings (Table 16). Thirteen plants

did not know the effect of their wage plans on the

earnings of these workers. Of the 46 plants in which

use of wage incentive plans is credited with increasing

the earnings of hourly workers, 30 plants reported

increases of between 10 and 30 per cent; 7 plants

reported increases of between one and 10 per cent;

one plant each experienced increases of between

30 and 40 per cent, and 40 and 50 per cent; and,

one plant claimed an increase in hourly workers'

earnings of over 50 per cent. Five of the 46 plants

were not sure to what extent earnings increased.

With regard to the effects of specific types of

wage incentive plans on earnings of hourly workers,

the use of piecework plans is credited with increases

up to, and exceeding 50 per cent, whereas measured

daywork and standard hours piecework reportedly

-62-

Table 16. Effect of 'iiiage Incentive Plans on Earnings of Hourly Workers

No Increase:

1 0-5%

6 5-10%

1 Do Not Know: 13 Increase: 46

8 10-15%

12 15-20%

11 20-30% _2:_ 40-50%

1 30-40% 1 over 50%

-63-

resulted in increases of up to 30 per cent; and, group

incentive plan users experienced increases of up to

15 per cent (Table 18).

2) Effect on Quantity Produced per Man-Hour.

Twenty-nine of the 60 plants (48.3 per cent) using wage

incentive plans of all types, answered that the quantity

of work produced per man-hour by hourly workers covered

by these plans increased "greatly," while 19 plants

(31.7 per cent) reported that this productivity has

increased "slightly," 2 plants report "no change,"

and 10 plants (6 per cent) do not know whether quantity

produced per man-hour has been affected by use of wage

incentives or not (Table 17).

Of the eight plants using measured daywork plans,

3, reported that quantity produced per man-hour has

increased greatly, 3 reported that it has increased

slightly, and 2 plants do not know the extent of this

effect {Table 18).

Eighteen of the 35 plants using piecework plans

(51.4 per cent) answered "increased greatly," 11

respondents answered "increased slightly," one

experienced no change, and 5 did not know what effect

this type of plan had on quantity of production

(Table 18).

-64-

Table 17. Effects of the Wage Incentive Plans in Use

>. >. >. r-1 r-1 >. r-1 .j.) .j.) r-1 .j.) ..c ..c .j.) (1j tu'.) !:u'.) (1j Q) •r-i •r-i Q) H r-1 r-1 M d Cl) Cl) d

0 'U 'U Q) 'U 'U s:: Q) Q) !:u'.) Q) Q) ;,a Cl) Cl) s:: U) Cl) m cu (1j cu ctl .j.) Q) Q) ..c (I) <I> 0 M H 0 $-i M !2; C) 0 0 0 s:: s:: Q) Q) 0

H H A A A

Quantity Produced Per Man Hour 29 19 2 0 0 10

Quality of Work l 14 25 10 0 10

Unit Labor Costs 1 0 3 31 12 13

Turnover 0 4 21 14 3 18

Absenteeism 0 3 27 8 3 19

-65-

Table 18. E.f.fects of Di.f.ferent Types o.f Wage Incentive Plans in Use

Type o.f Plan* 1 2 3 4 5 6 Total

No 0 l 0 0 0 Q l fl) Do Not Know 3 4 4 0 5 2 18 bD s::: l'I) Yes 5 30 11 0 3 0 49 ·r-f Q) s:: S::: bD "1

0-5% M "1 ...-1 0 l 0 0 0 0 l C\1~0.. l'-il 4-t Q) 5-10% 0 3 l 0 2 0 6 s:: 0 > 10-15% 1 5 3 0 1 0 10

·r-f •r-f 15-20% 3 8 1 0 0 0 12 Q) +> ,4.) Q) fl) s:: s::: 20-30% 1 3 5 0 0 0 9 fJ) :::> Q) ::s 30-40% 0 3 0 0 0 0 3 "1 0 0 Q) >, s:: s 40-50% 0 l 0 0 0 0 1 M.CH <t! 0 over 50% 0 l 0 0 0 0 1 s::: - - -H Total 5 25 10 0 3 0

S-4 Inc. Greatly 3 18 10 0 0 0 31 ::s Inc • Slightly 3 11 2 0 4 0 20 >.'d 0 ,4.) Q) ::r: No Change 0 l l 0 0 0 2 •r-f 0 Dec. Slightly 0 0 0 0 0 0 0 +> ::s s:: S::'d i Dec. Greatly 0 0 0 0 0 0 0 rd 0 ::S i:.t Do not Know 2 5 2 0 4 2 15 O'O.. i:.t - -Q)

Total 8 35 15 0 g 2 0..

*Legend for Tables 18 and 19.

1 - Measured daywork. 2 - Piecework. 3 - Standard hour piecework. 4 - Sharing plan. 5 - Group incentive plan. 6 - Other.

-66-

Ten standard hours piecework plan users (66.7 per

cent) answered that this type of plan enabled hourly

workers' productivity to "increase greatly," while 2

of these plants reported slight increases in quantity

produced; one plant experienced no change and 2 did

not know the effects of their plans. Standard hours

piecework plans appear to have the best effect upon

quantity of work produced (Table 18).

Users of group incentive plans were somewhat less

successful as 4 plants recorded slight increases in

quantity produced and two others did not know the effect

these plans had (Table 18).

3) Effect on Quality of Work Produced. By

contrast to the responses concerning quantity produced,

only one plant reported that the quality of the work

produced has increased greatly; 14 plants have

experienced slight increases in quality; 25 plants

have seen no change; and, 10 plants reported that

the quality of work produced has decreased slightly.

Ten plants did not know the effect of their incentive

plans on the quality of the work (Table 17).

The one plant reporting that work quality has

increased greatly employs a measured daywork plan.

-67-

Four other plants using this plan credit it with

slight increases in quality of work. One of these

plants has experienced no change in quality, one

claims a slight decrease in quality, and one plant

does not know what effect, if any, has taken place.

Measured daywork appears, therefore, to have the most

favorable effects upon quality of the work produced.

Half of the 35 plants employing piecework plans

reported no change in work quality while 7 reported

slight increases, 6 reported slight decreases, and

5 did not know of any effect.

One plant operating under the standard hours

piecework plan registered a slight increase in quality

with 4 answering "decreased slightly,u 7 seeing no

change, and 3 not knowing of any effects.

Of the respondents using group incentive plans,

work quality increased slightly in 4 plants and

decreased slightly in 2 plants, whereas 2 more

plants did not know of any effect.

4) Effect on Unit Labor Costs. Although one

plant contended that the use of wage incentive plans

caused unit labor costs to increase greatly, and 3

other plants reported no change, JO pilants (51.7 per

-68-

cent) experienced slight decreases in unit labor costs

and 12 more (20.0 per cent) reported that these costs

decreased greatly. Thirteen of the 60 plants employing

wage incentive plans had no opinion of the effect of

these plans on unit labor costs (Table 17).

Those plants employing a piecework plan of

remuneration exhibit the most varied responses

concerning the effect on unit labor costs. One of

these plants reported that such costs increased

greatly because of its piecework plan, but 20 others

(57.1 per cent of those using this type of plan)

reported a slight decrease and 8 more reported that

unit labor costs decreased greatly as a result of

using piecework plans (Table 19).

None of the plants using any of the other types

of wage incentive plans {i.e., measured daywork,

standard hours piecework, and group incentive plans)

reported an increase in unit labor costs. Each of them

experienced a degree of decrease in these costs

(Table 19).

5) Effect on Turnover. The overall effect of

wage incentive plans on turnover in the responding

plants using incentive plans was to decrease turnover.

-69-

Table 19. Effects of Different Types of Wage Incentive Plans in Use

Type of Plan* 1 2 3 4 5 6 Total

,:j Cl) Inc. Greatly 1 0 .0 0 0 0 1 c.... (.)

O::;:$ Inc. Slightly 4 7 1 0 4 1 17 ,:j >.o No Change l 17 7 0 0 0 26 +> S.. Dec. Slightly l 6 4 0 2 0 13 •r-f /l.,

,-f Dec. Greatly 0 0 0 0 0 0 0 ~t: Do Not Know l -2. ...l 0 2 l 12 ao :;: Total 8 35 15 0 8 2

J.t Inc. Greatly 0 1 0 0 0 0 l 0 Inc. Slightly 0 0 0 0 0 0 0 ..0 No Change 0 l l 0 0 l 3 (lj fl) i-:1 +> Dec. Slightly 4 20 6 0 3 0 33 fl) +> 0 Dec. Greatly 1 8 4 0 0 0 13 •rf 0 Do Not Know -1. --2. ..J± 0 --2. ...l 18 :5 Total g 35 15 0 g 2

Inc. Greatly 0 0 0 0 0 0 0 Sot

Inc. Slightly 0 3 0 0 l l 5 (I) No Change 5 13 4 0 3 0 25 > Dec. Slightly l g 5 0 0 0 11+ 0 s:: Dec. Greatly 0 l 2 0 0 0 3 J.t Do Not Know 2 10 ..J± 0 ..J± 0 20 :;:::f

E-1 - - - -Total g 35 15 0 8 l

s Inc. Greatly 0 0 0 0 0 0 0 Ul Inc. Slightly 0 2 0 0 1 0 3 •,-f No Change 3 15 7 0 5 1 31 (I) (I) Dec. Slightly 2 3 3 0 0 1 9 t1 Dec. Greatly l 2 l 0 0 0 4 Cl) Do Not Know 2 .ll _!± 0 2 0 21 Cl)

..0 Total $ 3,5 15 0 $ 2 <(

* See Legend, Table 18.

-70-

Four plants answered that use of wage incentives

resulted in slight increases in turnover, but, 14

plants reported slight decreases and 3 more plants

reported great decreases. Twenty-one respondents

could see no change in turnover and 18 plants did not

know what effect use of wage incentive plans had had

upon turnover of hourly workers (Table 17).

Once again, as with the other conditions above,

the use of piecework plans resulted in the most widely

varied effects on turnover of hourly workers. Although

most of the plants employing piecework plans (13 plants)

reported no change in turnover or did not know what

effects this type of plan might have had (10 plants),

the remaining plants were split in their opinions.

Three plants indicated slight increases and 8 reported

slight decreases.

The limited data from plants using measured

daywork plans (only 8 plants) would seem to indicate

that this type of wage incentive plan has very little

effect upon turnover. Five plants recorded no change,

two plants did not know of any effect, and only one

plant indicated a change, that being a slight decrease

in turnover.

-71-

As with measured daywork, only one plant using

group incentive plans reported a change in turnover

which in this case was a slight increase.

The responding plants using standard hours

piecework appear to have experienced more desirable

effects on turnover. Five of these plants reported

slight decreases in turnover, 2 reported great

decreases, 4 plants reported no change, and 4 more

plants did not know what effects their incentive plans

may have had on turnover of hourly workers (Table 19).

6) Effect on Absenteeism. The use of wage

incentive plans by respondents had much the same

effect on absenteeism of hourly workers as upon

turnover. The most notable difference in the effects

on these conditions is that more plants (27) experienced

no change in the amount of absenteeism than saw the

same effect (21) on turnover. Of those plants

registering changes in absenteeism through use of

wage incentives, 3 reported slight increases, 8

reported slight decreases, and 3 reported great

decreases. Nineteen plants answered that they did

not know what effects wage incentive plans may have

have had on absenteeism of hourly workers (Table 17).

-72-

Absenteeism decreased in 3 of the 8 respondent

plants employing measured daywork plans while there

was no change in 3 more of these plants. Two of the

plants did not know what effects use of a measured

daywork plan had on absenteeism.

The use of piecework plans resulted in somewhat

varied effects upon absenteeism in the 35 plants

employing this type of incentive plan. The responses

of these 35 plants concerning effects of piecework

plans upon absenteeism ranged from slight increases

in 2 plants to slight decreases in 3 plants to great

decreases in 2 other plants. Thirteen plants did

not know of any effect on absenteeism. Although the

figures above would indicate that use of pie.cework

plans tends to decrease absenteeism, the fact that

15 of the 35 plants reported no change in absenteeism

may be of more significance.

None of the 15 plants employing standard hours

piecework reported any increase in absenteeism. In

3 of these 15 plants, absenteeism decreased slightly

and in one plant this condition decreased greatly.

Several of these 15 plants, however, reported no

change in absenteeism which reflects the responses

-73-

concerning piecework plans (above). The same general

results are reported by plants using group incentive

plans as 5 of the 8 plants using this type of plan experienced no change in absenteeism. Only a single plant among these 8 reported a slight increase in absenteeism. Two plants using group incentive plans reported no change in absenteeism as did 4 plants

using standard hours piecework plans (Table 19).

Summary

In summary, it appears that the use of wage

incentive plans in general had rather favorable

effects upon the earnings of hourly workers, the

quantity of production of these workers, and unit

labor costs. Somewhat less favorable were the effects

of wage incentives on the quality of work produced by

hourly workers and the rate of turnover of the workers,

although the overall effects were favorable. The

effects of these plans upon absenteeism, while tending

to be slightly favorable, were somewhat negligible

with most respondents reporting no change in this

condition. It appears that the management of many

of the plants surveyed have given very little thought

to the effects of wage incentive plans upon turnover

-74-

and absenteeism. It is suggested that this is a

partial explanation for the responses concerning

these two conditions.

-75-

CHAP'rER V

CONCLUSIONS

In this chapter the significant results of the

survey (as presented in Chapter IV) will be summarized,

and conclusions will be drawn from these results in an

attempt to answer the questions posed in Chapter I.

Extent of the Use of Wage Incentive Plans

Of the plants responding to the survey, 64.l

per cent do not employ wage incentive plans and 35.9 per cent do employ wage incentive plans of remunera-

tion for hourly workers. Thus, approximately one-

third of the manufacturing plants operating within

Virginia, which have 50 or more employees, use wage

incentive plans.

There were not enough responses to the

questionnaire from many of the 20 industrial classi-

fications surveyed to constitute a statistically

significant sample for each classification. However,

10 of the 20 industry classifications were judged to

have enough respondents to justify conclusions about

the extent of the use of wage incentive plans in those

particular industries.

-76-

Wage incentive plans seem to be predominant in

the following industry classifications: Textile Mill

Products {22), Apparel and Other Finished Products,

etc. (23), Primary Metal Industries (33), and

Professional, Scientific and Controlling Instruments, etc. (38).

Further, it seems that wage incentive plans for

hourly workers are infrequently used in plants in the

following industry classifications: Food and Kindred

Products (20), Lumber and Wood Products, etc. (24),

Printing, Publishing, and Allied Industries (27),

Chemicals and Allied Products (28), Rubber and

Miscellaneous Plastics Products (30), Stone, Clay,

and Glass Products (J2), and Fabricated Metal

Products, etc. (34). These results would seem to both substantiate

and contradict the findings of a nation-wide survey,

as reported Factory, June 1965, which holds that

"traditional boosters" of wage incentive plans have

"radically cut" their use of these techniques. 1 The

examples of ''traditional boosters" given by the

laregory V. Schultz, "Plants' Incentives Slump Badly over Last 6 Years," Factory, Vol. 123, June, 1965, p. 70.

-77-

article are textiles, and furniture, stone-clay-

glass products, fabricated metal products,

electrical machinery, and the instrument-optics

industry.

The results of this study (as summarized above),

would seem to substantiate the Factory magazine

survey concerning Stone, Clay and Glass Products (32),

and Fabricated Metal Products (34) industries. The

use of wage incentives in Textile Mill Products (22),

and Professional, Scientific, and Controlling

Instruments (38) industries appears to be extensive

for the present time in Virginia and, therefore,

stands as a contradiction of the Factory survey.

Effects of Unions Upon Use of Wage Incentive Plans

Hourly workers are represented by a union in

28 of the 60 plants that employ wage incentive plans.

The hourly workers in 30 of these same 60 plants are

not represented by a union. Two plants using wage

incentive plans did not indicate whether or not their

workers have a union.

Of the 107 respondents which do not employ wage

incentive plans, 50 indicated that their workers did

-78-

not have a union, whereas the workers in 51 of these

plants are represented by a union. Six of these

plants did not indicate whether or not their workers have a union.

It would seem, therefore, that, in Virginia at

least, unions have little effect upon the existence

of wage incentive plans.

This finding is consistent with the findings of 2 the nation-Wide Factory; survey, referred to above,

which reports, "Unionism is not a deciding factor

in inhibiting work measurement or incentive use."

The article refers to the 11myth of union influence"

being opposed to wage incentive plans as being

"exploded" by the Factory survey.

Reasons for Not Employing Wage Incentive Plans

Approximately ~O per cent of the respondents do

not use wage incentive plans because individual output

is difficult to measure thereby making the use of

incentive plans impractical. Another 26 per cent

indicated that in their plants the rate of production

-79-

of hourly workers is determined by constant-speed

machinery, again rendering wage incentive plans

impractical.

Difficulty in measuring the production of

individual workers and the use of constant-speed

machinery would thus seem to be the primary reasons

why wage incentive plans are not used more extensively

by plants in Virginia.

Reasons for Employing Wage Incentive Plans

Of the 60 respondents using wage incentive plans,

56 (93.3 per cent) replied that, "Management sought to

improve production by instituting such a plan." One

plant credited union bargaining for institution of its

incentive plan and three plants gave 0 othertt answers.

Clearly the vast majority of wage incentive plans

seem to have been instituted by management to improve

the productivity of workers covered by the plans.

Types of Wage Incentive Plans Employed

Piecework plans are used by 58.5 per cent of

the 60 respondents using wage incentive plans and

15 plants (25.0 per cent) employ standard hours

piecework plans.

-80-

Apparently then piecework is the most popular

type of incentive plan among manufacturing plants

in Virginia with standard hours piecework plans a

somewhat distant second. Even less popular are t

measured daywork plans and group incentive plans.

The results of another survey made on a

nation-wide basis 3 show that standard hours piecework

plans are most widely used with "straight" piecework

a close second. This same survey indicated that over

the last 6 years piecework plans are gaining in

popularity at the expense of standard hours piecework.

If some allowance is made for the fact that

these two surveys were conducted in different ways,

the findings of the two would appear to be somewhat

consistent. However, there does appear to be reason

to believe that standard hours piecework is used

less extensively in Virginia than other areas.

Effects of Wage Incentive Plans

Of the 60 Virginia manufacturing plants indi-

cating use of wage incentive plans, 76.6 per cent

Jibid., p. 76. -

{45 plants) reported that incentive payment has

increased the earnings of hourly workers while 13

plants were unaware of the effect of their incentive

plans upon employee earnings. Only one plant reported

no increase.

Therefore, it appears that wage incentive plans

tend to increase the earnings of workers so remunerated.

Forty-eight (G6.7 per cent) of the 60 respondents

with wage incentive plans claimed that such plans

increase the quantity of production per man-hour.

Two plants reported no change in productivity, 10 more

did not know what effect their plans may have had,

and none of the plants reported a decrease in quantity

produced as a result of using these incentive plans.

Thus, it can be concluded that the use of wage incentive

plans tends to result in increased quantity of produc-

tion per man-hour.

With respect to the quality of the work produced

by hourly workers remunerated under wage incentive plans,

15 respondents (25 per cent) reported increased quality,

25 plants ( 41. 7 per cent) saw no effect, and 10 plants

(16.7 per cent) reported that quality has decreased as

a result of using incentives.

-82-

The results of the survey concerning the impact

of incentives upon quality of work produced are

inconclusive, although it would seem that, on balance,

quality is not adversely affected.

Although one respondent reported an increase

in unit labor costs as a result of a wage incentive

plan, and 3 plants indicated no change, 43 plants

(71.7 per cent) credit use of wage incentive plans

with decreasing unit labor costs. It follows, therefore,

that wage incentive plans tend to reduce unit labor

costs, providing, of course, that they are implemented

properly.

Twenty-one of the 60 responding plants with

incentive plans reported no change in turnover as a

result of using incentives, and 18 more of these plants

did not know what effect, if any, the plans had on

turnover. Nevertheless, 17 plants reported a decrease

in turnover as opposed to 4 plants reporting increased

turnover. It can be said that the net effect of wage

incentive plans probably decreases turnover of the

hourly workers covered by these plans.

Wage incentive plans appear to have an even

weaker effect upon absenteeism among hourly workerso

Twenty-seven plants reported no change in absenteeism

and 19 plants did not know what effect wage incentives

may have had. Eleven plants claimed absenteeism

decreased as compared with 3 plants that report

increases in this condition.

One can speculate that plant management has

probably given less thought to the impact of incentive

plans upon turnover and absenteeism, especially since

many of the respondents did not know to answer these

questions.

Nevertheless, it would appear that wage

incentive plans may be responsible for slight

decreases in absenteeism.

Summary

In summary, it is concluded that where wage

incentive plans are applicable, they bring about the

following results:

1) The quantity of work produced increases.

2) The quality of the work produced is not

adversely affected and may increase.

3)' The earnings of hourly workers remunerated

under these plans increase.

-84-

4) Unit labor costs decrease.

5} Unionism is not an apparent factor in the

use of wage incentive plans.

6} Absenteeism and turnover porbably decrease

but management's knowledge of these two

conditions is often limited and the

results are inconclusive.

These results are consistent with the theoretical

advantages of wage incentive plans as presented in the

literature. In the words of one writer, "The primary

and universal reason for the installation of wage

payment plans (i~e., wage incentives) is today, as

ever, to secure the lowering of unit costs on the one

hand, and to improve the earnings of employees on the

other." 4 The results of this study show conclusively

that these objectives, and others, are accomplished

through the use of wage incentive plans.

-85-

VI. BIBLI0GRAPtIY

Jucius, Michael J., Personnel Management, Fifth Edition,

Homewood, Illinois, Richard D. Irwin, Inc., 1963.

Kennedy, Van Dusen, Union Policy and Incentive Wage

Methods, New York, Columbia University Press,

1945. Louden, J. Keith, Wage Incentives, New York, John Wiley

and Sons, Inc., 1950.

Lovejoy, Lawrence c., Wage and Salary Administration,

New York, The Ronald Press Company, 1959. Lytle, Charles W., Wage Incentive Methods, Revised

Edition, New York, The Ronald Press Company, 1942.

Michael, Lionel B., Wage and Salary Fundamentals and

Procedures, First Edition, New York, McGraw-Hill

Book Company, Inc., 1950.

Pigors, Paul, and Charles A. Myers, Readings in

Personnel Administration, First Edition, New York,

McGraw-Hill Book Company, Inc., 1952.

Schultz, Gregory V., "Plants' Incentives Slump Badly

over Last 6 Years, 11 Factory, June, 1965.

Virginia State Chamber of Commerce, Directory of

Virginia Manufacturing and Mining, 1961-1962.

-86-

Wolf, William B., Wage Incentives as a Managerial Tool,

New York, Columbia University Press, 1957.

VII. ACKNOWLEDGMENTS

The author wishes to express his gratitute to his

parents for their encouragement and financial assistance

which helped to make this study possible.

He is especially grateful to his wife, Ann, for

the encouragement and assistance which she so patiently

contributed to the completion of this thesis.

The author is indebted to Dr. Arthur A. Thompson,

Jr., Dr. Norman L, Brown, and Professor John M.

Barringer, Jr., the members of his graduate committee,

for their advice and assistance which guided his efforts

in this work.

The vita has been removed from the scanned document

-89-

APPENDIX A

-90-

Virginia Polytechnic Institute College of Business

Blacksburg, Virginia 2~061

Department of Business Administration

Dear Sir:

Your plant has been selected, along with 293 others, to participate in a survey of manufacturing indus-tries within the state of Virginia.

The survey is part of a thesis research project in the Department of Business Administration, Virginia Polytechnic Institute, to determine the extent to which wage incentive plans are used within the state.

Your cooperation is needed to make this research successful and meaningful. Please answer the appropriate questions on the enclosed questionnaire and return it in the stamped, self-addressed envelope.

No attempt will be made to identify responses from individual plants. However, for purposes of identifying the manufacturing industry or industries into which each of the 294 firms surveyed are classi-fied by the U.S. Department of Commerce, the appropriate category has been checked on page one of each questionnaire. A proportionate number of plants are being surveyed from all twenty of the categories listed on page one.

Thanking you for your cooperation, I am

Yours truly,

Michael N. Cassell

-91-

APPENDIX 11

Questionnaire

-92-

Industry classification according to u. s. Department of Commerce as taken from the Directory of Virginia Manufacturing and Mining published by Virginia State Chamber of Commerce, 1961-62.

20. Food and Kindred Products. 21. Tobacco Manufactures. 22. Textile Mill Products. 23. Apparel and Other Finished Products Made

from Fabrics and Similar l>iaterials. 24. Lumber and Wood Products, Except Furniture. 25. Furniture and Fixtures. 26. Paper and Allied Products. 27. Printing, Publishing, and Allied Industries. 28. Chemicals and Allied Products. 29. Petroleum Refining and Related Industries. 30. Rubber and Miscellaneous Plastics Products. 31. Leather, Leather Products. 32. Stone, Clay, and Glass Products. 33. Primary Metal Industries. 34. Fabricated Metal Products, Except Ordnance,

Machinery, and Transportation Equipment. 35. Machinery, Except Electrical. 36. Electrical N!achinery, Equipment, and

Supplies. 37. Transportation Equipment. 38. Professional, Scientific, and Controlling

Instruments; Photographic and Optical Goods; Watches and Clocks.

39. Miscellaneous Manufacturing Industries.

SECTION I: GENERAL INFORMA11ION:

1. How long has your plant been in operation?

1 - 5 years

5 - 9 years

10 - 14 years

15 - 19 years

20 - 25 years

over 25 years

-93-

2. How many people are employed in your plant? _ 0-24

25-49 _ 50-74

_ 75- 99

_ 100-199

200-499 -

_ 500-1000

_ over 1000

J. How many hourly (non-salaried) workers are employed in your plant? _ 0-24

_ 25-49

_ 50-74

_ 75- 99

. 100-199 -_ 200-499

_ 500-1000

over 1000

4. Do any of the hourly workers in your plant belong to a union? If so, how many?

No

Y-es

0-24 25-49

50- 74 75- 99

100-199

200-499

_ 500-1000

over 1000

5. Does your plant presently employ a wage incentive plan of remuneration for hourly workers (i.e., any wage plan other than a daily or hourly wage)?

YES (if answer is YES, please answer all - questions in Section III). _ NO ( if answer is :NO, please answer all

questions in Section II).

SECTION II: TO BE ANSWERED IF PLANT DOES NOT PRESENTLY EMPLOY A WAGE INCENTIVE PLAN:

1. Has your plant employed a wage incentive plan in the past?

Yes No

-94-

2. If answer to question II, 1, was Yes, why was use of a wage incentive plan in your plant discontinued? (Please check all applicable answers::)

3.

Management opposed continuance of wage incentive plans.

_ Union opposed continuance of wage incentive plans.

Nature of work changed so that wage incentive plans were no longer applicable to type of work done.

_ Work changed from worker-paced to machine-paced work.

_ Quality of work decreased under wage incentive plan.

Work standards and/or incentive rates not acceptable to workers.

Work standards and/or incentive rates - not acceptable to union.

Work standards and/or incentive rates not acceptable to management.

_ Other (Please specify:)

were

were

were

If answer to question II, 1, was Yes, how long has it been since your plant employed a wage incentive plan?

0-2 years

2-5 years

5-10 years

10-15 years

15-20 years

over 20 years

-95-

4. My plant has never employed a wage incentive plan for hourly workers because: (Please check all applicable answers:)

_ M:a.nagement opposed to use of wage incentive plan. ·

_ Union opposed to use of wage incentive plan.

_ Rate of production of hourly workers is determined by constant-speed machinery and, therefore, wage incentive plans are not applicable.

Production of individual workers is not readily measurable and, therefore, wage incentive plans are not applicable.

Workers (or union) have not asked for such - a plan and appear to be content without it.

_ Other (Please specify:)

SECTION III: TO BE ANS'W-ERED IF PLANT DOES EJIIIPLOY A WAGE INCENTIVE PLAN: -

l. Why was a wage incentive plan instituted in your plant?

Union bargained for a wage incentive plan.

Non-union workers requested such a plan.

Management sought to improve production by - instituting such a plan.

Other (Please specify:)

-96-

2. How long has your plant employed a wage incentive plan?

0- 2 years

2- 5 years

5-10 years

_ 10-15 years

_ 15-20 years

over 20 years

3. Approximately what percentage of hourly workers in your plant are remunerated under a wage incentive plan?

- 0- 9% 50- 59% _ 10-19% _ 60- 69%

20-29% 70- 79%

30-39% 80- 89% _ 40-49% _ 90-100%

4. If more than one remuneration plan is employed in your plant, check the plans used in the column at left and indicate the number of workers covered by that plan in the right hand column.

No. of workers covered

1) Measured daywork (wage determined - by efficiency of worker) •••••••

2) Piecework (pay based on units of output) •••••••••••••••••••••

3) Standard hours piecework (standard hours per unit produced) ·•••····•··•·•·•·•··•·

4) Sharing plan (pay based on a - percentage of time saved on

a job} •........................

5) _ Group incentive plan •••••••••••

-97-

6) Other (please specify) •••.............•••

7) vaywork (paid on basis of time only) ...................................... .

5. Has institution of wage incentive plan in your plant increased the earnings of non-salaried workers? If so, by approximately how much?

No 15-20% Yes 20-30% Do not know 30-40% 0- 5% 40-50% 5-10% over 50%

10-151b 6. What overall effect have your wage incentive

plans had upon quantity of production per man hour?

Increased greatly

Increased slightly

No change

Decreased slightly

Decreased greatly

Do not know

7. What overall effect have your wage incentive plans had upon quality of work produced?

Increased greatly

Increased slightly

No change

Decreased slightly

Decreased greatly

Do not know

-98-

8. ½hat overall effect have your wage incentive plans had on unit labor costs?

9.

Increased greatly

Increased slightly

No change

Decreased slightly

Decreased greatly

Do not know

v'J'hat overall effect have vour wage incentive plans had on turnover of the hourly workers covered by the plan?

Increased greatly

Increased slightly

No change

Decreased slightly

Decreased greatly

Do not know

10. \ilhat overall effect have your wage incentive plans had on absenteeism of the hourlv workers covered v ' by the plan'?

Increased greatly

Increased slightly

No change

Decreased slightly

Decreased greatly

Do not know

-99-

APPENDIX C

Supplementary Results

-100-

Table 20. 'r abulation of Number of Questionnaires Sent and Returned for Each Industry Classification

U) +) Q)

s:: S:: H Cl) CJ) 0 ct! 0 Q) Q)

•r-1 ,-f :z:: H H +) 0.. ·r-i •r-i 4-1 cd M Cl:! ct! 0 C) 4-1 0 U) 4-1 s:: s:: >,.,..; 0 (l) 0 s:: s:: 'O +)

MC+-! 0© 0 0 Q) s:: (I) +) ·r-1 H l.£'\ >, M·r-1 Q) .,..; s:: Q) Q) s:: Cll Cl) Q) 0 (l) +) .-f+'M o r-1 S.. :1 Cl) .0 ..c: ,-f .0 Cl) +) .0 Cl) ::I ,.Q :;:$ 'O Ci1 § +) 0.. s (l) s:: Cl:! (l) +) S.. Cl:! +' s:: ,-f •r-i s :1 ::, Q) Cl) :1 (l) (l) Cl) Q) HO z :;: Cil ZGC/l :::> ry 0::: ii. :::> 0:::

20 181 50 24 48.0 21 32 12 8 66.8 22 62 20 15 75.0 23 91 30 14 46. 7 24 89 29 19 65.5 25 46 15 9 60.0 26 38 14 10 71.4 27 34 12 7 58.3 28 43 15 10 66.7 29 3 3 1 33.3 30 10 5 3 60.0 31 17 7 6 85.7 32 52 17 12 70.6 33 16 7 6 85.7 34 49 17 16 94.1 35 28 10 6 60.0 36 18 8 4 50.0 37 21 9 5 55.6 38 8 6 4 66.7 39 18 8 7 87.5

Total 856 290 186

-101-

Table 21. Comparison of Answers Given by Plants Having Jifferent Reasons for Not Employing Wage Incentive Plans

,:,:

Reasons Wage Incentive Plans Not Used*

1 2 3 4 5 6 Total

0-24 1 0 0 5 0 0 6 25-49 1 1 3 5 4 1 15 50-74, 0 0 0 5 0 0 5 75-99 1 1 3 3 1 1 10

100-199 0 2 7 13 5 4 31 200-499 2 1 10 11 6 2 32

500-1000 2 0 4 3 0 0 9 over 1000 0 0 5 2 1 0 8

Total 7 5 32 47 17 g

Legend for Tables 21, 22, and 23.

1 - opposed to use of wage incentive plan.

2 - Union opposed to use of wage incentive plan.

3 - Rate of production of hourly workers is determined by constant-speed machinery and, therefore, wage incentive plans are not applicable.

4 - Production of individual workers is not readily measurable and, therefore, wage incentive plans are not applicable.

5 - Workers (or union) have not asked for such a plan and appear to be content without it.

6 - Other.

-102-

Table 22. Comparison of Answers Given by Plants Having Different Reasons for Not Employing Wage Incentive Plans

Reasons Wage Incentive Plans .,_ Not Used,,.

l 2 3 4 5 6 Total

.p 1-5 0 0 0 1 0 0 1 s:: cu r-i 5-9 0 0 3 / 0 0 9 P-. 0

s:: (/) 0 10-14 3 1 3 2 0 1 10 f... •rl <tS .p Q) <tS

15-19 l 1 :>-ir-. (l) 5 2 0 2 11

Ly P, 00 20-25 l 0 2 4 2 0 9 f... i::: Q) •ri over 25 3 4 19 34 16 5 81 ,..Q

:3 8 6 32 49 18 $ z Totals

No 4 0 14 2$ 6 8 60 s::

/' 18 11 0 55 0 Yes -1 0 _17 •ri s:: :::> Totals 7 6 31 46 17 s

* See Legend, Table 21.

-103-

Table 23. Reasons Wage Incentive Plans Not Used

Industry Reasons Wage Incentive Plans Classification Not Used *

1 2 3 4 5 6 Total

20 l 1 10 11 2 2 27 21 1 0 1 1 2 1 6 22 0 0 1 1 0 0 2 23 0 0 0 l 0 1 2 24 0 0 3 $ 5 1 17 25 0 0 2 2 l 0 5 26 1 0 3 2 2 0 $ 27 0 1 2 2 3 0 $ 28 0 0 3 6 2 0 11 29 0 0 1 0 0 0 1 30 1 0 1 1 0 0 3 31 l 0 2 2 0 0 5 32 0 2 4 6 0 0 12 33 0 0 0 0 0 0 0 34 1 2 0 5 1 2 11 35 1 0 1 1 1 0 4 36 1 0 0 2 0 1 4 37 0 0 1 1 0 0 2 38 0 0 0 0 0 0 0 39 0 0 1 0 1 0 2

* See Legend, Table 21.

-104-

Table 24. Comparison of Answers Given by Plants Having Different Reasons for Discontinuing Wage

Incentive Plans

Reasons Given for Discontinuing Wage Incentive Plan

1 2 3 4 5 6 7 $ 9 Total

No 4 0 2 2 1 1 0 0 2 12 s:: 0 Yes 2 _J± -2 -1. _g_ ...l ...l ...l _J± 23 ·r-i s:: ::::>

/ Total b 4 7 5 3 2 1 1 6

Legend for Tables 24, 25, and 26.

1 - Management opposed continuance of wage incentive plans.

2 - Union opposed continuance of wage incentive plans.

3 - Nature of work changed so that wage incentive plans were no longer applicable to type of work done.

4 - Work changed from worker-paced to machine-paced work.

5 - Quality of work decreased under wage incentive plan.

6 - Work standards and/or incentive rates were not acceptable to workers.

7 - Work standards and/or incentive rates were not acceptable to union.

$ - Work standards and/or incentive rates were not acceptable to management.

9 - Other.

-105-

Table 25. Comparison of Answers Given by Plants Having Different Reasons for Discontinuing Wage

Incentive Plans

Reasons Given* l 2 J 4 5 6 7 8 9

s:: .j.) 0 1-5 0 0 0 0 0 0 0 0 0 4-1 s:: •r-1

0 (1j .j.) 5-9 0 0 0 0 0 0 0 0 2 r-1 (1j S-i 11. S-i 10-14 1 l 0 0 0 0 0 0 l Q) Q) 15-19 0 l 0 l 0 2 l 0 l ..0 (I) P. 3~0 20-25 0 0 0 0 0 0 0 0 0 z Q) s:: over 25 5 2 7 4 3 0 0 l 2 >-t •r-1

Q) >

Q) •r-1 0-2 l 0 0 0 0 0 0 0 l 0 +l '"d s:: s:: Q) 2-5 l 1 0 0 0 l 1 l 4 ·r-f Q) Cl) Cl) 0:::, 5-10 l 0 2 1 l 0 0 0 0 s:: 10-15 2 2 2 1 1 0 0 0 1 Cll H S:: S.. (1j 15-20 0 1 0 1 0 0 0 0 0 (1j Q) r-1 <l> llOP.. over 20 l 0 2 l 1 0 0 0 0 >-t (1j

0-24 0 0 0 0 0 0 0 0 0 4-1 25-49 0 0 0 1 0 l 0 0 1 0 fl)

50-74 1 0 1 2 0 0 0 0 0 >, S-i S-i r-1 <l> 75-99 0 1 0 0 0 l 1 0 0 a> S-i ..0 ::1 S-i 100-199 l 2 2 0 2 0 0 0 1

200-499 1 0 1 1 0 0 0 0 2 z 500-1000 1 0 0 0 0 0 0 l 1 over 1000 1 0 2 1 0 0 0 0 0

* See Legend, Table 24.

-106-

Table 26. Comparison of Answers Given by Plants Having Different Reasons for Discontinuing ·wage

Incentive Plans

Reasons Given for Discontinuing Wage Incentive Plans*

1 2 3 4 5 6 7 8 9

20 0 0 0 0 0 0 0 0 0 21 1 1 2 l 0 0 0 0 0 22 0 0 0 0 0 0 0 0 0

s:::: 23 0 0 0 0 0 0 0 0 0 0 24 0 1 0 0 0 l 1 0 0 ..... ,I.> 25 l 0 l 0 1 0 0 0 0 (If 0 26 0 0 0 0 0 0 0 0 0 ..... 27 0 1 0 0 0 0 0 0 0 '+-I ..... 28 3 0 1 l 0 0 0 0 1 Cl} 0) 29 0 0 0 0 0 0 0 0 0 (If

30 0 0 0 0 0 0 0 0 l ,-f 0 31 1 0 0 0 0 0 0 1 0 >, 32 0 0 0 2 0 1 0 0 0 J.t 33 0 0 1 1 0 0 0 0 0 4->

34 0 1 1 0 2 0 0 0 0 '"d 35 Q, l l 0 1 0 0 0 0 s:: 36 0 0 0 0 0 0 0 0 0 H

37 0 l 1 0 1 0 0 0 1 38 0 0 0 0 0 0 0 0 0 39 0 0 l 0 0 0 0 0 l

* See Legend, Table 24.

-107-

Table 27. Comparison of Answers Given by Plants Having Different Reasons for Use of Wage Incentive Plans

Reasons Wage Incentive Plan Used

l 2 3 4

20 0 0 0 l 21 1 0 1 0 22 0 0 12 2

s:::: 23 0 0 11 0 0 •r-1 24 0 0 5 0 .p co 25 0 0 4 0 () 26 0 0 6 0 •r-1

27 0 0 1 0 ·ri (J} 28 0 0 0 0 rJ) 29 0 0 0 0 ct!

r-1 30 0 0 0 0 0 31 0 0 2 0 >, 32 0 0 2 0 $-t .p 33 0 0 5 0 rJ) :::;$ 34 0 0 5 0 '"d 35 0 0 2 1 s:::: H 36 0 0 1 0

37 0 0 1 0 38 0 0 4 0 39 0 0 3 0

* Legend:

1 - Union bargained for a wage incentive plan.

2 - Non-union workers requested such a plan.

3 - Management sought to improve production by instituting such a plan.

4 - Other.

*

ABSTRACT

The purpose of this thesis was to test the theory

of wage incentives, as presented in the literature, to

determine if the theory is sound when applied to work

situations.

Data were collected by means of a survey of

manufacturing plants within the state of Virginia.

Questionnaires were sent to a randomly selected sample

of 294 plants from among the 20 manufacturing industry

classifications.

It was determined that in those manufacturing

plants in which wage incentive plans are applicable,

they result in increased earnings for hourly workers,

increased productivity of these workers, and decreased

unit labor costs. It was further determined that

unionism has no apparent effect on the use of these

plans.