Labour Economics


Safelite Glass Company


The headquarters of Safelite Glass Corporation is located in Columbus, Ohio and is America’s largest installer of automobile glass. Recently, Safelite, under the direction of CEO, Garen Staglin, and President, John Barlow, instituted a new compensation scheme for the autoglass installers. Until January, 1994, glass installers were paid an hourly wage rate, which did not vary in any direct way with the number of windows that were installed. During 1994 and 1995, installers were shifted from an hourly wage schedule to performance pay – specifically, to a piece rate schedule. Rather than being paid for the number of hours that they worked, installers were now paid for the number of glass units that they installed. The rates varied somewhat, but on average installers were paid $21 per unit installed. At the time that the piece rates were instituted, the workers were also given a guarantee of approximately $11 per hour. If their weekly pay based on piece rates came out to less than the guarantee, they would be paid the guaranteed amount. Many workers ended up in the guarantee range.


Part A.

Given the change in payment systems answer the following questions


  1. How, specifically, is output affected by a switch from time rates to piece rates? Explain (4 marks)
  2. Should there be some guaranteed wage? Why ? (4 marks)
  3. What does the switch do to recruitment? (4 marks)


(1,000 words max)


Part B.

Find ONE example from the labour market in your country of a job position that

offers some form of an incentive payment scheme as part of the overall benefits package and include this with your assignment.


(a) Identify that part of the compensation package that involves an incentive for

the employee. Is the incentive for the individual strong or weak ? Explain.

(4 marks)


(b) Identify some “income risks” for the potential employee associated with the

incentive scheme.

(4 marks)


(1,000 words max)


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