In an experiment among people who were hired to distribute copies of a new newspaper to passers-by, a pay raise had no effect on performance except in the case of workers who felt the original wage was unacceptable. For them, the increase boosted performance by about 7pc, says a team led by Alain Cohn of the University of Zurich. The findings suggest that the ‘positive reciprocity’ effects of a wage increase are elusive, and that the performance boost from a pay raise may be due to countering certain employees’ sense that their original wages were too low and therefore unfair.

(Source: Management Science)

Published in Dawn, Economic & Business, November 24th, 2014