For almost 30 years now, most empirical work in labor economics has relied on human-capital theory to drive statistical specifications. A parsimonious structure, the theory has proved itself capable of generating rich, testable implications. Humancapital theory is primarily a supply-side approach that focuses on the characteristics and skills of the individual workers. It pays far less attention to the environments in which workers work. As such, the humancapital framework has led researchers to focus on one class of questions, but to ignore others. Specifically, little attention has been paid to the jobs in which workers are employed. The entire notion of a job, which seems central to the thinking of businesspersons and administrators, is virtually absent from most labor-market analyses. Standard production theory treats labor as a homogeneous commodity and ignores the slots or positions in which that labor is used. The institutional literature, and especially the work on internal labor markets, asks questions that differ from those asked by human-capital theory. The research agenda discussed below returns to the questions posed by the old internal-labor-markets literature (see especially Melvin Reder [1955] and Peter Doeringer and Michael Piore [19711). Directing attention to jobs also changes the kinds of analytic techniques appropriate for empirical analysis. Human-capital theory has created a large quantitative literature that is based on a few basic empirical methods. A jobs-based theoretical structure must also guide empirical methods, but the suitable methods often differ from those best for answering human-capital-oriented questions.

Gary Becker was one of the greatest thinkers of the 20th century. He advanced social science by introducing economic thinking into areas that were thought to be off limits. Because his theory was motivated by his desire to explain the world, his analyses were highly policy relevant. His work on discrimination, deterrence of crime, fertility, human capital, and the family all produced implications that were testable and verified by his and others' empirical research. Equally important, each research area provided policy guidance and many of his ideas have been implemented by government and non-government organizations.

Entrepreneurs are generalists who put together teams of people and assemble resources and capital. To do this effectively, they must have a general set of skills. Individuals may be endowed with a general set of skills, but endowments can be augmented by investment in human capital. It is shown that formal schooling is used to supplement the skill set of those who choose to become entrepreneurs.

Much of the theory in personnel economics relates to effects of monetary incentives on output, but the theory was untested because appropriate data were unavailable. A new data set for the Safelite Glass Corporation tests the predictions that average productivity will rise, the firm will attract a more able workforce, and variance in output across individuals at the firm will rise when it shifts to piece rates. In Safelite, productivity effects amount to a 44-percent increase in output per worker. This firm apparently had selected a suboptimal compensation system, as profits also increased with the change.

Variable pay is usually defined as pay that is tied to some measure of worker output. The most typical form of variable pay historically was the piece rate, which was more prevalent during the early part of the 20th century than it is at the beginning of the 21st. There is a resurgence in variable pay, particularly as it relates to executives, whose pay is tied to output through some mechanism like stock options or bonuses that depend on individual or firm performance. Why use variable pay? The typical reaction is that variable pay provides incentives to put forth effort. Although true, discrete-pay schemes also generate incentives. Much of the confusion in the literature results from the use of the terms high-powered and low-powered incentives, which connote difference in ability to elicit worker effort.' It is more informative to make distinctions between discrete and continuous pay and between inputbased and output-based pay.2 Pay structures can be summarized by the following equation: