The Use of Attendance Incentive Differentials for Managing Worker Shortages: A Study of Export Manufacturers in Global Supply Chains

Amidst frequent and consequential worker shortages, export manufacturers in developing economies use incentives to reward workers for perfect attendance each month. However, it is unclear to what extent the attendance incentive differentials observed between export manufacturers are shaped by both employers' and workers' interests. By applying prior pay setting theory in the context of evidence of when consequential worker shortages occur due to workers' pursuit of personal or professional interests during workdays, I develop a framework that explains export manufacturers' policy decisions on the incentive level to reward workers' perfect attendance. Hypotheses are tested using data on 104 export apparel manufacturing establishments in Sri Lanka. The findings imply that attendance incentive pay setting is shaped not only by export manufacturers' strategic interest in minimizing vulnerability to worker shortages but also by their understanding of workers' willingness to forgo personal/professional interests (e.g., time-off, alternative careers/jobs) to attend on every workday.