Remuneration for silviculture in British Columbia: insights from transaction cost economics

This paper examines factors determining the payment schemes for silvicultural workers when activities are performed in-house rather than contracted out. The payment schemes examined include piece rates, hourly wages and salaries (monthly or bi-weekly). The research is based on data from a 1997 survey of British Columbia forest companies. Results of our analysis indicate that firms choose silvicultural payment schemes to synchronize the attributes of activities with the firms’ characteristics for the purpose of economizing on transaction costs. Generally, larger companies rely more on wages, and especially salaries, than do smaller companies. The latter are more likely to opt for piece-rate payment schemes. The more workers that a company hires directly, the more likely that a piece-rate system is adopted. However, as the length of silvicultural season increases, the greater the chance that the forest companies rely on salaries.