Increases Affect Piece-Rate

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There are a number of principles that influence the construction of effective piece-rate pay systems. One such notion is the importance of proportionately increasing piece-rate pay when minimum wage goes up (or when cost-of-living increases are reflected in hourly pay raises). Some producers think, “Hey, my piece-rate-paid people are already earning well above the minimum wage, so why should I raise my piece-rate?”

The fastest, most capable worker in your crew, when paid by the hour, tends to work as fast as the slowest worker. But crew workers who are paid by the piece perform at a much higher rate and expend substantially more energy. When a piece rate is first established, this difference in effort is acknowledged. Workers earn significantly more than when paid by the hour. Over time, however, when hourly wages go up but piece-rate pay levels stay constant, this pay differential is slowly eliminated. Workers become increasingly suspicious and unmotivated.

On the other hand, elevating piece rates when the minimum wage goes up (or when workers obtain a cost-of-living pay raise), gives workers a clear signal about how their efforts are valued.

For more information on designing an effective piece-rate or bonus system, go to tinyurl.com/99cq or contact Billikopf at gebillikopf@ucdavis.edu or 209-525-6800.

Gregorio Billikopf is a Labor Management Farm Advisor with the University of California and Visiting Professor of the Faculty of Agricultural Sciences of the University of Chile.

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