Although the UK Chancellor of the Exchequer recently outlined plans for the encouragement of profit-related-pay, there is little empirical evidence for or against such a policy. A nationally representative microeconomic data set, the Workplace Industrial Relations Surveys of 1980 and 1984, is used in an attempt to fill this void. The extent of income-sharing schemes in the UK is estimated, and the hypothesis that profit-related pay produces greater firm prosperity is tested. It is found that profit sharing is much more common in the UK than has been popularly realized. No evidence has been found, at conventional confidence levels, that establishments with profit-related pay have superior financial performance. Cross-tabulations suggest that sharing and nonsharing establishments have similar employment growth rates and approximately the same quality of industrial relations. The results do not provide support for the recent government initiatives.
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