8 Public management: personnel economics in the public sector
8.1 Background
The modern literature on “personnel economics” or the economics of human resource management has focused on a range of traditional and new lines of inquiry. Our understanding of the incentives provided by the hierarchy of roles and remuneration within organisations has been advanced by the development of the theory of internal labour market tournaments. Links between performance and remuneration have been explored, particularly in relation to pay for output versus salary or wage-based pay, and the link between the remuneration structure used by a firm and overall organisational performance. Since the explicit use of teams in work environments has increased considerably in the last 25 years, much effort has been devoted to both understanding the nature of team work, and to the complexities of incentives and remuneration for members of teams.
In this chapter, we briefly review the literature in each of these areas, and suggest some possible areas of relevance for the public sector in New Zealand. Developments in the last 25 years to a large extent reinforce and extend the focus on remuneration, incentives, performance and benchmarking against private-sector labour markets that was a feature of the NPM literature in New Zealand.
