John H. Bishop

The Recognition and Reward of Employee Performance

This paper examines when and to what extent an individuals relative wage depends on his/her productivity relative to others doing the same job. Starting wages were influenced by background characteristics and training cost realizations but not by relative productivity. Wages one year later were influenced by productivity but the effects were small. The wage elasticity was .2 at small establishments and 0 at establishments with over 400 employees. The wage response to relative productivity and training costs was weaker in small labor markets, suggesting that wages do not fully respond to performance because of the firm specificity of job performance differentials.

The Effect of Public Policies on the Demand for Higher Education.

A binomial logit model is fitted to the college attendance behavior of 27,046 male high-school juniors in 1960, divided into 20 subgroups defined by student ability and family income. Tuition, high admissions standards, travel costs, and room and board costs all have significant negative effects on attendance. The highest elasticities of demand are found to occur in the low-income strata and lower-middle ability quartile, suggesting that an efficient subsidy program should focus on these groups. Coefficients of forgone earnings and measures of the local payoff to college attendance are small but generally have the expected sign.

On-The-Job Training of New Hires

A growing number of commentators are pointing to employer sponsored training as a critical ingredient in a nation’s competitiveness. American employers appear to devote less time and resources to the training of entry level blue collar, clerical and service employees than employers in Genoany and Japan (Limprecht and Hayes 1982, Mincer and Higuchi 1988, Koike 1984, Noll et al 1984, Wiedemold-Fritz 1985). In the 1983 Current Population Survey, only 33 percent of workers with 1 to 5 years of tenure reported having received skill improvement training from their current employer (Hollenbeck and Wilkie 1985). Analyzing 1982 NLS-Youth data, Parsons (1984) reports that only 34 to 40 percellt of the young workers in clerical, operative, service and laborer jobs reponed that it was “very true” that “the skills [I am] learning would be valuable in getting a better job.” The payoffs to getting jobs which offer training appear to be very high, however. In Parson’s study, having a high learning job rather than a no learning job in 1979 increased a male youth’s 1982 wage rate by 13.7 percent. While the 1980 job had no such effect, the 1981 job raised wages by 7.2 percent when it was a high learning job rather than a no learning job.

Drinking from the Fountain of Knowledge: Student Incentive to Study and Learn - Externalities, Information Problems and Peer Pressure

Students face four decision margins: (a) How many years to spend in school, (b) What to study, (c) How much effort to devote to learning per year and (d) Whether to disrupt or assist the learning of classmates. The thousands of studies that have applied human capital theory to the first two questions are reviewed elsewhere in this volume and the Handbook series. This chapter reviews an emerging economic literature on the effects of and determinants of student effort and cooperativeness and how putting student motivation and behavior at center of ones theoretical framework changes ones view of how schools operate and how they might be made more effective. In this new framework students have a dual role. They are both (a) investors/consumers who choose which goals (outputs) to focus on and how much effort to put into each goal and (b) workers getting instruction and guidance from their first-line supervisors, the teachers. A simple model is presented in which the behavior of students, teachers and administrators depends on the incentives facing them and the actions of the other actors in the system. The incentives, in turn, depend upon the cost and reliability of the information (signals) that is generated about the various inputs and outputs of the system. Our review of empirical research support many of the predictions of the model. Student effort, engagement and discipline vary a lot within schools, across schools and across nations and have significant effects on learning. Higher extrinsic rewards for learning are associated the taking of more rigorous courses, teachers setting higher standards and more time devoted to homework. Taking more rigorous courses and studying harder increase student achievement. Post-World War II trends in study effort and course rigor, for example, are positively correlated with achievement trends. Even though, greater rigor and higher standards improve learning, parents and students prefer easy teachers. They pressure tough teachers to lower standards and sign up for courses taught by easy graders. Curriculum-based external exit examinations (CBEEES) improve the signaling of academic achievement to colleges and the labor market and this increases extrinsic rewards for learning. Cross-section studies suggest that CBEEES result in greater focus on academics, more tutoring of lagging students, and higher levels of achievement. Minimum competency examinations (MCE) do not have significant effects on learning or dropout rates but they do appear to have positive effects on the reputation of high school graduates. As a result, students from MCE states earn significantly more than students from states without MCEs and the effect lasts at least eight years. Students who attend schools with studious well-behaved classmates learn more. Disruptive students generate negative production externalities and cooperative hard-working students create positive production externalities. Peer effects are also generated by the norms of student peer cultures that encourage disruptive students and harass nerds. In addition learning is poorly signaled to employers and colleges. Thus, market signals and the norms of student peer culture do not internalize the externalities that are pervasive in school settings and as a result students typically devote less effort to studying than the taxpayers who fund schools would wish.

The impact of academic competencies on wages, unemployment, and job performance

Abstract When schooling is controlled, tests assessing competence in mathematical reasoning, science, and English have almost no impact on wage rates and earnings during the eight years following high school graduation in NLS-Youth and other data sets. Analyses of military data sets, however, indicate that these same tests are good predictors of job performance. The conclusion is that the market rewards competencies signalled by credentials. Competencies not signalled by credentials go unrewarded for many years because employers do not know which job applicants have them and because workers and employers prefer employment contracts in which wage rates adjust only partially to reflect outstanding performance.

The Impact of Curriculum-Based External Examinations on School Priorities and Student Learning

Excerpt] The first major prediction of the theory is that an increase in the extrinsic rewards for learning will cause student effort and achievement to increase. The primary extrinsic reward for achievement in high school is a higher probability of completing college. Thus the extrinsic rewards for learning in high school depend on the size of the payoff to college and on how contingent college admissions decisions are on achievement in high school. Time series data suggests that changes in college selectivity and payoff may have contributed to the ups and downs of student achievement during the postwar period. The college payoff and test scores rose during the 1950s and peaked during the 1960s. Both series then declined during the 1970s, bottomed out around 1980, and then rose during the 1980s. The doubling of the payoff to college during the 1980s appears to have contributed to more homework being assigned and done and a big increase in the proportion of students taking rigorous mathematics and science courses. Analysis of cross section data also supports a causal link. High school students living in communities where the payoff to college is large tend to take a heavier academic course load and are more likely to go to college.

Job Performance, Turnover, and Wage Growth

This article presents evidence that turnover is negatively selective on a workers job performance. At establishments with about 17 employees, workers who are 1 SD (21%) less productive than average during the first few months on the job are 11 percentage points more likely to be laid off or fired and 7 percentage points more likely to quit during the succeeding year. At large nonunion establishments and in small labor markets, productivity has large effects on involuntary separations but almost no effect on quits. Productivity appears to be positively related to layoffs and quits at unionized establishments.

The Role of End-of-Course Exams and Minimum Competency Exams in Standards-Based Reforms

Excerpt] Educational reformers and most of the American public believe that most teachers ask too little of their pupils. These low expectations, they believe, result in watered down curricula and a tolerance of mediocre teaching and inappropriate student behavior. The result is that the prophecy of low achievement becomes self-fulfilling. Although research has shown that learning gains are substantially larger when students take more demanding courses2, only a minority of students enroll in these courses. There are several reasons for this. Guidance counselors in many schools allow only a select few into the most challenging courses. While most schools give students and parents the authority to overturn counselor recommendations, many families are unaware they have that power or are intimidated by the counselor’s prediction of failure in the tougher class. As one student put it: “African-American parents, they settle for less, not knowing they can get more for their students.”

Why the Apathy in American High Schools

Excerpt] Yes, it is a classic chicken versus egg problem. We assign teachers the responsibility for setting high standards but we do not give them any of the tools that might be effective for inducing student observance of the academic goals of the classroom. They finally must rely on the force of their own personalities. All too often teachers compromise academic demands because the majority of the class sees no need to accept them as reasonable and legitimate.

Jobs, Cash Transfers, and Marital Instability: A Review and Synthesis of the Evidence.

Expanding welfare benefits to include two-parent families has long been considered an option for a public policy designed to strengthen family units. The negative income tax experiments employed this option, and it was found that the experimental group experienced 50 percent higher marital instability than the control group that was eligible for the current set of income-maintenance programs-AFDC and Food Stamps. Marital instability increased even when an experimental plan was no more generous than AFDC for the splitting wife. The conclusion must be either that because of differences in information, stigma, or transaction costs, the experiments produced more powerful independence effects than an equivalent amount of AFDC, or that receiving NIT payments somehow reduced the attractiveness of the married state by calling into question the success of the husband as provider. These findings suggest that, if strengthening marriages is a public-policy objective, two-parent families would be better aided by wage subsidies that reduce the unemployment of family heads and raise the earnings of the familys working members.