Racial Earnings Differentials and Performance Pay

Abstract

This paper presents an information model in which workers receiving output-based pay experience less racial earnings discrimination than those receiving time rates and supervisory evaluations. Tests using the National Longitudinal Survey of Youth reveal no racial wage differential among male workers paid output-based pay while confirming a significant differential among those paid time rates. In addition, the racial wage differential among those receiving bonus pay, usually based on supervisory evaluations, tends to be larger than for those not receiving such bonuses.