Incentive Wage Payments

Report Outline
Incentive Wages to Increase War Production
Development of Incentive Wage Systems
Trade Union Attitude Toward Incentive Plans
Special Focus

Incentive Wages to Increase War Production

Possible Savings of Manpower and Plant Capacity

Wide introduction of incentive wage systems, as a means of expanding war production, is at present being urged by industrial managers, by officials of the War Production Board, and by certain minority factions within the trade union movement. Under incentive wage systems, of which there are numerous types, the worker's earnings rise or fall in accordance with actual output; an immediate financial incentive is given the employee to increase his effort and expand the volume of his production.

Wartime advantages claimed for the incentive wage plan go beyond the increase to be gained in output of goods. It is asserted that the added production could be achieved without increasing the size of either the labor force or plant and machine capacity. In cases where increased output was not needed, current rates of production could be maintained with a reduced labor force.

Industrial Managers and the Incentive Wage Plan

Management interest in incentive wage systems is not wholly a result of the wartime need for expanded production, for even in peacetime many industrial spokesmen were critical of the “time wage” system under which the majority of workers in manufacturing are employed. During the decade of the thirties it was contended that payment of a fixed hourly or daily wage did nothing to stimulate the individual worker to his maximum effort, with the result that lagging output kept production costs high. Under an incentive wage system, on the other hand, total costs of factory operation and the cost per unit of product could be reduced, and profits increased, despite larger gross payments for wages, because the increased wages would be given in return for increased production, while overhead costs remained substantially constant.