This study analyzes the trade-off relationship between layoffs and wage cuts. If the introduction of a performance-based payment system stimulates workers’ pecuniary-motivated minds, their morale can be damaged more severely by wage cuts than prior to the introduction thereof. Utilizing this idea, we demonstrate theoretically that the more heavily wages are based on performance, the more firms, fearing that workers’ morale will be damaged by wage cuts, try to avoid wage cuts and instead prefer layoffs. Next, we show empirically the trend whereby firms with performance-based payment systems are unlikely to implement wage cuts. Given this first-stage regression, the status of a performance-based payment system, based on the firm’s past decision and assured to be exogenous, is employed as an instrumental variable (IV) for wage cuts in a layoff regression model to overcome simultaneous bias. In the second-stage regression, the IV estimates for the impact of wage cuts on layoffs are significantly negative: if a firm implements wage cuts, it will reduce the probability of layoffs by 0.172. This supports the theoretical implication that implementing wage cuts can be a potential device for reducing layoffs. These results may imply an unexpected side effect of the increasing use of performance-based payment systems: as such systems become more widespread, layoffs will increase because firms will become less likely to impose wage cuts, thus potentially resulting in high unemployment.

中文翻译：

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裁员和裁员的最佳组合-基于绩效的支付系统的意外副作用

这项研究分析了裁员与减薪之间的权衡关系。如果引入以绩效为基础的支付系统能够激发工人的金钱动力，那么与降低工资相比，减薪会严重损害他们的士气。利用这一思想，我们从理论上证明，工资是基于绩效的，而公司越多，他们担心工人的士气会受到减薪的损害，他们会尽量避免减薪，而宁愿裁员。接下来，我们从经验上显示趋势，即基于绩效的支付系统的公司不太可能实施减薪。在进行了第一阶段的回归之后，基于绩效的支付系统的状态（基于公司过去的决定并确保是外生的），被用来作为裁员回归模型中减薪的工具变量（IV）来克服同时偏见。在第二阶段回归分析中，减薪对裁员的影响的IV估计值明显为负：如果公司实施减薪，将裁员的可能性降低0.172。这支持了理论上的暗示，即实施减薪可以成为减少裁员的潜在手段。这些结果可能暗示越来越多使用基于绩效的支付系统会产生意想不到的副作用：随着此类系统的普及，裁员人数将会增加，因为企业实施减薪的可能性较小，从而可能导致高失业率。减薪对裁员的影响的IV估计显着为负：如果公司实施减薪，将裁员的可能性降低0.172。这支持了理论上的涵义，即实施减薪可能是减少裁员的潜在手段。这些结果可能暗示越来越多使用基于绩效的支付系统会产生意想不到的副作用：随着此类系统的普及，裁员人数将会增加，因为企业实施减薪的可能性较小，从而可能导致高失业率。减薪对裁员的影响的IV估计显着为负：如果公司实施减薪，将裁员的可能性降低0.172。这支持了理论上的涵义，即实施减薪可能是减少裁员的潜在手段。这些结果可能暗示越来越多使用基于绩效的支付系统会产生意想不到的副作用：随着此类系统的普及，裁员人数将会增加，因为企业实施减薪的可能性较小，从而可能导致高失业率。