Social Incentives in the Workplace

Abstract

We present evidence on social incentives in the workplace, namely on whether workers' behaviour is affected by the presence of those they are socially tied to, even in settings where there are no externalities among workers due to either the production technology or the compensation scheme in place. To do so, we combine data on individual worker productivity from a firm's personnel records with information on each worker's social network of friends in the firm. We find that compared to when she has no social ties with her coworkers, a given worker's productivity is significantly higher when she works alongside friends who are more able than her, and significantly lower when she works with friends who are less able than her. As workers are paid piece rates based on individual productivity, social incentives can be quantified in monetary terms and are such that (i) workers who are more able than their friends are willing to exert less effort and forgo 10% of their earnings; (ii) workers who have at least one friend who is more able than themselves are willing to increase their effort and hence productivity by 10%. The distribution of worker ability is such that the net effect of social incentives on the firm's aggregate performance is positive. The results suggest that firms can exploit social incentives as an alternative to monetary incentives to motivate workers. 2009Abstract We present evidence on social incentives in the workplace, namely on whether workers' behavior is affected by the presence of those they are socially tied to, even in settings where there are no externalities among workers due to either the production technology or the compensation scheme in place. To do so we combine data on individual worker productivity from a firm's personnel records with information on each worker's social network of friends in the firm. We find that compared to when she has no social ties with her co-workers, a given worker's productivity is significantly higher when she works alongside friends who are more able than her, and significantly lower when she works with friends who are less able than her. As workers are paid piece rates based on individual productivity, social incentives can be quantified in monetary terms and are such that -(i) workers who are more able than their friends are willing to exert less effort and forgo 10% of their earnings; (ii) workers who have at least one friend who is more able than themselves are willing to increase their effort and hence productivity by 10%.The distribution of worker ability is such that the net effect of social incentives on the firm's aggregate performance is positive. The results suggest that firms can exploit social incentives as an alternative to monetary incentives to motivate workers.

Peer Effects in Science: Evidence from the Dismissal of Scientists in Nazi Germany

“…Mas and Moretti (2008) show that grocery store cashiers increase their productivity when working alongside high productivity peers. Furthermore, Bandiera, Barankay, and Rasul (2007) show that the productivity of fruit pickers conforms to a common norm set by their peers.…”

“…A careful early study by Harthorne published in 1937 counts 1111 dismissals from the German universities and technical universities between 1933 and 1934. 5 This amounts to about 15 percent of the 7266 university researchers present at the beginning of 1933. Most dismissals occurred in 1933 immediately after the law was implemented.…”

Learning unethical practices from a co-worker: The peer effect of Jose Canseco

“…I taught which steroid has which e¤ect on the body, and how to mix or "stack" certain steroids to get a desired e¤ect." 4 Canseco claimed that he shared his knowledge not only with other players, but also with trainers who would transmit the knowledge throughout the league. He writes (page 211) that: "As soon as the trainers I talked to started getting involved, the steroid ‡oodgates burst.…”

“…3 In addition, he speci…cally named six famous power-hitters that he personally injected with steroids when they were teammates. 4 Naturally, these claims were treated with skepticism, especially since Canseco's reputation was tarnished even in his playing days, and he was particularly known for doing just about anything for money. As a result, no one really knows whether his claims are true or whether they were part of a publicity stunt to help promote his book.…”

“…See footnote 387 on page 170 of the Mitchell Report. 4 to use a form of group punishment -such as punishing the whole …rm for the behavior of individual workers. Group punishment on the whole …rm would increase the incentives for …rms to monitor their workers, while producing peer pressure among workers to stay away from dubious practices.…”