Temporary Performance Pay and Worker Motivation: Evidence from a Natural Field Experiment

IZA Logo

IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 09.03.2012, 12:15 - 13:30


Presentation by 

David B. Huffman (University of Pittsburgh)


The psychology literature and some management textbooksargue that performance-contingent pay may change workers’ “intrinsic motivation” to work, but there is almost no evidence from a real work setting. In a field experiment in a real work setting, we implemented the classic design from psychology, which involves the treatment group temporarily receiving performance-based payments (on top of the base wage received by both treatment and control). Treatment group workers produced more during incentives, but substantially less later on, relative to control. The net effect on output was thus zero, but incentive payments were costly, so from a cost-benefit perspective performance pay was strongly inferior. A substantial rest break scheduled right after the incentive period, and evidence on self-reported fatigue, suggest that differential fatigue does not explain the results. Rather, workers report reduced intrinsic motivation. Importantly, however, a sub-sample of workers actually has a positive spillover from incentive pay, working harder than similar workers in control even after incentives are removed. This tendency is systematically related to worker personality type. Thus, in markets with appropriate screening or sorting, performance pay need not be harmful, and might even increase intrinsic motivation.

For more information, please contact seminar@iza.org