Yesterday’s Washington Post contained an interesting “Department of Human Behavior” column by Shankar Vedantam, called “When Play Becomes Work.” It points to yet another unfortunate feature of “growing up” (and getting old): that as grownups we start to expect to be paid for any exertion of effort, which can sap our internal motivation when the effort is no longer “just for fun” but instead is primarily for financial reward. Shankar explains the scientific evidence behind the (perverse-to-economists) theory that suggests at least some of us might work “harder” if we were actually paid less:
Psychologists have long been interested in what happens when people’s internal drives are replaced by external motivations. A host of experiments have shown that when threats and rewards enter the picture, they tend to destroy the inner drives. Paychecks and pink slips might be powerful reasons to get out of bed each day, but they turn out to be surprisingly ineffective — and even counterproductive — in getting people to perform at their best.
More than three decades ago, Edward Deci, a social and personality psychologist at the University of Rochester, found the first experimental evidence of a phenomenon with wide relevance to the way most Americans conduct their personal, professional and social lives.
Deci tracked a bunch of college students who were solving puzzles for fun. He divided them into two groups. One group was allowed to keep solving puzzles as before. People in the other were offered a small financial reward for each puzzle they solved.
The psychologist later evaluated the volunteers: He found that people given a financial incentive were now less interested in solving puzzles on their own time. Although these people had earlier been just as eager as those in the other group, offering an external incentive seemed to kill their internal drive.
Beliefs about the utility of rewards and punishments in motivating human behavior are deeply ingrained, and most people don’t know that more than 100 research studies have shown that motivating people in this manner can have the unintentional effect of undermining their internal drives.
The striking thing about the research, said Roland Benabou, an economist at the Woodrow Wilson School of Public and International Affairs at Princeton University, is that it is so starkly at odds with bedrock economic principles.
“A central tenet of economics is that individuals respond to incentives,” Benabou noted in one research study. “For psychologists and sociologists, in contrast, rewards and punishments are often counterproductive, because they undermine intrinsic motivation.”
This pure, potentially adverse psychological effect of making rewards “too financial” in nature definitely is something new for economists to consider, as “starkly at odds” with what we are taught in our microeconomic theory courses. (In economist’s lingo, it offers the rather startling possibility that the wage rate doesn’t just affect our budget constraint, but our utility function as well. It sounds a bit like a case where the free market can transform us into “monsters”–or at least lazy “Pavlovian” humans.)
But don’t get us economists wrong–we already understand that people get “utility” from (value) things other than what money can buy (yes, really). When it comes to what people choose to do for a “living”, most people at least implicitly weigh the costs (pecuniary or not) versus the benefits (pecuniary or not) of accepting certain employment and do not just go work for the highest bidder. (I’d even like to think that not everyone who earns gobs of money is doing it just for the money–and hence won’t be subject to the bad psychological transformation–but simply enjoys the good fortune of getting paid so much for doing what they would be willing to do for much less.) It’s the economist’s concept of “compensating differential” that tells us that we often choose a job with lower pay but higher “quality of worklife” (assuming we can’t find that job with both higher pay and higher quality of worklife, that is).
(Tip to employers: don’t go throwing this “compensating differential” term around when trying to sell a potential employee on your lower-pay-but-higher-quality position you’ve offered him (unless the potential employee is a US-trained labor economist), lest you be misunderstood as offering to match the higher salary some other employer has offered him…. This advice is based on a true experience of my husband.)
Working mothers (UPDATE: ok, maybe some working fathers, too), especially, understand the concept of “compensating differential” and often make the conscious tradeoff of accepting a lower salary for greater flexibilty and quality of (work and home) life. (In fact, I just made that tradeoff in leaving Capitol Hill for the Concord Coalition.) Because we have responsibilities to our families, it’s not simply a case of ”do what you love, and the money will follow” (which would say “don’t worry about how much you’ll get paid”)–but instead “can I afford to do what I love?” (which says “I want to do what I love, but I need to be able to pay the bills”). In EconomistMom terms, the “income effect” of how high or low are the wages we command probably matters as much or more than the incentive (or “substitution”) effect, in terms of the positions we choose to accept, the tradeoff between the higher and lower paying jobs we’re willing to make. The “price” of a higher-quality-but-lower-wage job is the differential between that lower wage and our higher wage alternatives (so the smaller the difference, the more attractive the lower-wage job), but the better quality job is a “luxury” good that we are better able to afford and more likely to choose the higher our overall household income (including our own (lower) wages). And just like luxury goods, sometimes people see a higher price as a signal of higher quality (whether real or not), so that a higher price can sometimes create more demand, not less, for the product–or in this case, for the lower-wage job. So both the incentive effects and income effects suggest that a higher wage offered on the higher-quality-but-(still) lower-wage job would make one more likely to choose such employment.
Once we’ve placed ourselves somewhere on the high wage vs. high quality employment possibilities frontier (chosen our job), the level of wages one receives on the job can matter as well for how “hard” we work at the job. Whether the job is high paying or low paying, there’s a positive correlation between wages and effort. If we’re ever cognizant of the fact that we’re earning less than our full market potential, then our wage rate can still matter for our on-the-job morale (”is that all I’m worth to them?”), and we might take advantage of opportunities to boost our ”effective wage” by effectively working fewer hours, for example, or by expending less effective effort by, for example, babysitting one’s son at the office. (Not that I’d ever do that here at Concord…)
That some people in fact choose their employment based on the “do what you love (as long as you can afford it)” model might in fact comfort employers who cannot afford but lower wages, but who want to know they’re recruiting a committed workforce. It’s great from both the employer’s and employee’s perspectives if it’s true that the employee has so much passion about their work that they’d be willing to do their job for free or at least a lot less money–i.e., that the work feels like play. …Well, as long as the boss doesn’t take you up on it.