Does How You are Paid Affect the Way You Feel?

Pub. Date
25 June, 2012

We show that worker wellbeing is not only related to the amount of compensation workers receive but also how they receive it. Those in receipt of group performance bonuses, profit shares, and those in share ownership schemes, have higher job satisfaction than other employees, having conditioned on wage levels. The size of the satisfaction effect depends on the size of the bonus payment. Those in receipt of incentive payments are also less likely to quit the firm. These findings hold having accounted for person fixed effects. We show that one way in which these Ôshare capitalist' modes of pay achieve this effect is by dampening the negative wellbeing effects of what we typically think of as 'bad' aspects of job quality. About half of the effect can be accounted for by employees' tendency to reciprocate in return for the 'gift' of share capitalism. These forms of pay also have positive wellbeing spill-over effects to co-workers.