Can pay-for-performance increase the motivation of public employees? By providing a basis for personnel decisions, particularly linking rewards to performance, performance appraisals aim to increase employees' work motivation and ultimately to improve their work performance and organizational productivity. With the emphasis on results-oriented management, performance appraisals have become a key managerial tool in the public sector. Critics charge, however, that pay-for-performance is ineffective in the public sector, largely because the link between performance and rewards is weak. However, no one has empirically measured the strength of the linkage. If performance ratings do have an impact on career success in the federal service, they might contribute to race and gender inequality. Although many studies have examined factors affecting gender and racial differences in career success, studies that try to connect gender and racial inequalities to managerial tools are scarce. Using a one percent sample of federal personnel records, the first essay examines the impact of performance ratings on salary increases and promotion probabilities, and the second essay explores whether women and minorities receive lower ratings than comparable white males, and women and minorities receive lower returns on the same level of performance ratings than comparable white males. The first essay finds that performance ratings have only limited impact on salary increases, but that they significantly affect promotion probability. Thus, the argument that performance-rewards link is weak could be partially correct, if it considers only pay-performance relationships. The second essay finds that women receive equal or higher performance ratings than comparable white men, but some minority male groups, particularly black men, tend to receive lower ratings than comparable white men. On the other hand, the returns on outstanding ratings do not differ between women and minority male groups and white men, though women groups seem to have disadvantages in promotion with the same higher ratings as comparable men in highly male-dominant occupations.

Can pay-for-performance increase the motivation of public employees? By providing a basis for personnel decisions, particularly linking rewards to performance, performance appraisals aim to increase employees' work motivation and ultimately to improve their work performance and organizational productivity. With the emphasis on results-oriented management, performance appraisals have become a key managerial tool in the public sector. Critics charge, however, that pay-for-performance is ineffective in the public sector, largely because the link between performance and rewards is weak. However, no one has empirically measured the strength of the linkage. If performance ratings do have an impact on career success in the federal service, they might contribute to race and gender inequality. Although many studies have examined factors affecting gender and racial differences in career success, studies that try to connect gender and racial inequalities to managerial tools are scarce. Using a one percent sample of federal personnel records, the first essay examines the impact of performance ratings on salary increases and promotion probabilities, and the second essay explores whether women and minorities receive lower ratings than comparable white males, and women and minorities receive lower returns on the same level of performance ratings than comparable white males. The first essay finds that performance ratings have only limited impact on salary increases, but that they significantly affect promotion probability. Thus, the argument that performance-rewards link is weak could be partially correct, if it considers only pay-performance relationships. The second essay finds that women receive equal or higher performance ratings than comparable white men, but some minority male groups, particularly black men, tend to receive lower ratings than comparable white men. On the other hand, the returns on outstanding ratings do not differ between women and minority male groups and white men, though women groups seem to have disadvantages in promotion with the same higher ratings as comparable men in highly male-dominant occupations.