Impact of Compensatory Payments on Labor Productivity of Industrial Cooperatives

Examining the strategies related to the promotion of human resource productivity, and quality level of laborers using wage payment is considered as the most important factor responsible for quantitative as well as qualitative economic growth of the society. Obviously, if the employees working in any part of the economic sector have high productivity, the overall performance of that sector will be improved in accordance with productivity. The aim of this study is to find out whether any increment in wage payments of the laborers as an effective measure can cause a substantial increase in the labor productivity and value added in industrial cooperatives. In order to study the effects of compensatory earnings by the employees on their productivity, the Cobb-Douglas model and panel data regression were used to analyze productivity performance of laborers working in industrial cooperatives across 30 provinces during the period 2006-2011. Moreover, the regression analysis on panel data of these cooperatives was applied to examine which section of compensatory payments, i.e., wage or other payments, has the highest effect on labor productivity. The results show that the variable of compensatory payments is of significant and positive effect on value added of industrial cooperatives in Iran. However, the direct wages have higher impact than other payments on labor productivity.