Do co-workers' wages matter?
Subtitle: theory and evidence on wage secrecy, wage compression and effort
By: by Gary Charness, Peter Kuhn.
Contributors: Kühn, Peter.
Series: Discussion paper ;; no. 1417; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) ;; no. 1417
Publisher: IZA
Published: 2004
Place of publication: Bonn, Germany
Language: eng
Format: Electronic resource
Description: "We study worker and firm behavior in an environment where worker effort could depend on co-workers' wages. Theoretically, we show that an increase in workers' concerns' with coworkers' wages should lead profit-maximizing firms to compress wages under quite general conditions. However, firms should be harmed by such concerns, and such concerns can justify paying equal wages to workers of unequal productivity only when those concerns are asymmetric (in the sense that only underpayment matters). Our laboratory experiments indicate that workers' effort choices are highly sensitive to their own wages, but largely unresponsive to co-workers' wages. Despite this, in apparent anticipation of a negative worker reaction, firms in our experiment were more likely to compress wages when wages became public information. Profits were not significantly reduced by a requirement to make wages public. Overall, our results seem to weaken the case that either wage secrecy or wage compression is a profit-maximizing policy in practice"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 4/13/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.