September 17, 2006
The Abuse of Incentive Pay
One standard criticism of union contracts is that workers doing the same job with the same experience usually get the same pay-- with fewer bonuses for outstanding work. It must just be union rigidness protecting lousy workers that explains such an approach, right?
Well look at the Center on Disease Control, courtesy of the NYTimes, where abuse of incentive pay has ended up diverting pay from front-line scientists to the top management:
In 2005, the records show that officials in Dr. Gerberding's office received 60 premium bonuses totaling $515,075, or about 4 percent of all bonuses granted within the centers. Because bonus money is limited — about 1.5 percent of the total personnel budget, Mr. Skinner said — the growing share of premium bonuses for Dr. Gerberding's closest advisers has meant less money is available for some scientists and other workers.Incentive pay sounds nice, but it usually means that management lines its own nest and bonuses get handed out to those who tow the management line-- and those who challenge management in any way get nothing.
So the upshot is that incentive pay often ends up doing very little to improve performance, but does a lot to lower the pay of all workers while undermining overall worker power in the workplace. Which explains why most workers when they vote on a union contract decide to eliminate incentive pay where they can. In most cases, the best workers under a union contract will get more pay without incentives than they will from an incentive system that over time lowers pay for all workers.
Posted by Nathan at September 17, 2006 07:31 AM