... it is expected to increase output per worker and facilitate the incorporation of a more heterogeneous labour force. If output can be clearly measured, piece rates are considered simpler and more efficient than time wages. While employers need to monitor for quality control when piece rates are used, it is generally believed that employers do not need to monitor effort or screen workers since workers are paid only for what they produce1. By improving incentives, piece rates may increase income for those who decide to work at piece rate, while simultaneously reducing employer unit labour costs. Since pay is dependent on what is actually produced rather than on time spent - implying greater income uncertainty - workers are thought to require a small increase in the average expected pay per time spent when working at piece rate instead of at a time wage.2 Paying on the basis of output has ...

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