Association for Public Policy Analysis & Management

Evidence suggests that performance-based pay schemes common to the growing gig economy may result in poor worker health outcomes. However, cross-sector evidence of its long-term effects on US workers is lacking. This paper represents the first longitudinal cross-sector analysis relating health outcomes to pay type in US workers. Data from the 1979 National Longitudinal Survey of Youth (1998-2000) are used in a random effects logit model to predict self-reported health limitations related to performance-based pay, controlling for worker, work environment, time and location trends. Additional cross-sectional analysis of specific health outcomes are explored to identify specific endpoints that might be driving observed effects.

The evidence suggests that performance and piece rate pay, which are increasingly popular as a compensation mechanism for contract workers in the gig economy, increase the odds of health limitations compared to salaried work. Interestingly, the deleterious effects of incentive pay are not born uniformly across workers, and instead disproportionately impact low-wage, female, and non-white workers. Notably, non-white piece rate workers had the highest odds of reporting a health limitation compared to their salaried peers across the analyses (OR=2.2) followed closely by female workers (OR=2.0), while the negative health effects of performance and piece rate pay on health disappear for the alternative groups of higher wage, white, and male workers. More research is needed to understand whether these differential effects are the result of wage incentives, or related in some way to current and historical discrimination practices in hiring and employment.