Self-selection between Payment Methods Based on Quantitative and Subjective Performance Measures

Abstract

Payment methods based on quantitative performance measures make it harder for employers’ prejudice and stereotypes to be translated into differential earnings and easier for external authorities to judge if this has occurred. Thus, workers who perceive that they are discriminated against in the labor market will be more likely to seek this type of compensation rather than payment based on subjective performance measures than workers who do not have that perception. The present study explores this prediction using the European Working Conditions Survey and interpreting (respectively) foreign-born and native-born employees as workers who perceive and who do not perceive discrimination. I found that foreign-born workers are more likely than native-born workers to be paid based on quantitative performance measures compared to payments based on subjective performance measures and fixed wages.