Fixed Wage or Share: Contingent Contract Renewal and Skipper Motivation

Abstract

Fishermen around the world are usually remunerated with shares. Iceland is no exception in that respect. The fixed wage systems that have been tried out have been short-lived and their utilization limited. The fundamental question asked in this paper is: Why do almost all vessel owners use the same remuneration principles? The answer offered is that the circumstances under which fishing is conducted play a vital role. Surveillance of the conduct of employees is almost impossible. Hence, vessel owners must develop some system for motivating workers and discouraging shirking. It is shown that sharing is better than alternative forms of remuneration in that respect. The production unit is a small platform that is not easily abandoned during a trip. The product of a given trip is well defined. All of these factors help to explain the prevalence of sharing in fisheries. The model of the paper can also shed some light on the on-going conflict between vessel owners and fishermen unions in Iceland in the 1990s.