Firms adopting profit-related-pay (PRP) contracts pay wages at levels that vary with the firm' s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.
Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time, which would most seriously weaken the argument that PRP contracts increase worker productivity.