DP1097 | Coverage by Incremental Scales

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This paper uses the British Household Panel Survey to investigate when seniority is rewarded by automatic incremental scales. Scales are seen as an alternative to individual merit pay. They are likely to be used when individual productivity is hard to measure, when firms provide all workers with similar levels of training and when workers have sufficient bargaining power to gain insurance against mis-measurement in the allocation of merit pay. The data provide support for these hypotheses.