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Productivity, wages and intrinsic motivations

Abstract

There is a long-standing debate in labour economics on the impact of workers’ intrinsic motivations on equilibrium wages. One direction in economic theory suggests that intrinsically motivated workers are willing to accept lower wages and “donate” work, for example, in terms of unpaid overtime (the donative-labour hypothesis). In the other direction, intrinsic motivations are expected to increase worker productivity and, in turn, wages (the intrinsic motivation-productivity hypothesis). Using a new database of a sample of workers in the cooperative non-profit sector, we find that, consistently with the motivation-productivity hypothesis, more motivated workers earn significantly higher wages, which signals higher productivity. Evidence supporting the donative-labour hypothesis is weaker, even though a generally positive connection between motivations and work-donation is confirmed. We interpret these findings by arguing that the impact of the donative-labour effect is dominated by the intrinsic motivation-productivity effect.

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Notes

  1. 1.

    Following Preston (1989), the acceptance of less pay by intrinsically motivated workers is equivalent to a monetary donation to an organization which produces social benefits. In this sense, these workers show a strong willingness to pay for public goods. Frank (1996) emphasizes that intrinsic motivations are a component of job amenities, and therefore interprets the difference in wages as a compensating differential. Rose-Ackerman (1996) argues that it is the alignment between workers’ ideals and corporate goals which leads workers to accept lower pay. Finally, Hansmann (1980) interprets the differential as a sorting mechanism, by which workers who attach a relatively lower weight to pecuniary compensation and a relatively higher weight to contributing to public goods are hired in the non-profit industry. What all these rationales have in common is the capacity to explain why the differential persists, and why it is not bridged by a migration of workers from the non-profit to the profit sector.

  2. 2.

    This conclusion hinges on the assumption that below a given threshold of intrinsic motivations, workers would not accept lower pay in the non-profit industry.

  3. 3.

    As will be shown below, since we can measure the degree of intrinsic motivations of individual respondents, we are definitely within a framework of heterogeneity of intrinsic motivation (case (ii)).

  4. 4.

    In our data, the distribution of workers’ intrinsic motivations does not show particular irregularities (e.g. bimodal distribution), although all distributions are skewed in a pronounced manner either to the right or to the left.

  5. 5.

    The International Social Survey Programme on work orientations reports that more than 25 % of workers consider the fact that their job “allows them to help other people” and “is useful to society” as its most important characteristic. This share is equal in size to that of workers who value “high income” as the most important characteristic (see Clark 2005). This evidence on the relevance of non-pecuniary motivations is noteworthy. It implies that when deciding on job offers, a significant proportion of workers is driven by moral and other-regarding considerations, rather than by personal interest.

  6. 6.

    The Universities of Trento, Bergamo, Brescia, Milano Bicocca, Napoli Federico II and Reggio Calabria.

  7. 7.

    The Italian National Agency for Statistics.

  8. 8.

    Social cooperatives (cooperative sociali), like all types of cooperatives, are controlled by non-investor stakeholders, and deliver socially-oriented, public benefit services. According to Italian law (Special Law no. 381/1991), the goals of social cooperatives are the social integration of disadvantaged citizens, the general well-being of the community and human development. Social cooperatives are of two types: Type A social cooperatives manage health and education services, while Type B social cooperatives (also called work integration social enterprises) operate in industry, agriculture, trade or the service sector with the goal of including within the labour market “disadvantaged” workers (for example, the disabled, ex-prisoners, or ex-drug addicts), who must amount at least to 30 % of the workforce.

  9. 9.

    The extremely high response rate is due to the careful set-up of the survey. All the organizations involved were contacted in advance, and received the questionnaires. Involvement in and consensus on the survey was also achieved thanks to the support of representative meso-level bodies (for example, ConSolida, the Consortium of Social Cooperatives in the Trentino Province). Trained data collectors were sent on site, usually more than once. All the workers of an organization were involved where the organizations had up to 15 employees. For larger organizations, a random sample of workers was extracted on the basis of the three above-mentioned stratification criteria. Workers either compiled the questionnaires in groups with the support of the data collectors, or took the questionnaires home (in both cases, the questionnaires were always handed in to the collectors anonymously in envelopes), while late spare questionnaires were posted directly to the surveyors by the organizations.

  10. 10.

    The pyramid of needs designed by Maslow (1954) identifies five categories: physiological needs (or prime needs), needs of security (including stability and protection), needs of identification and involvement (both in a society and in groups), needs of esteem (such as self-esteem and other rewards), and needs of self-fulfilment (such as realization of personal and professional abilities).

  11. 11.

    These items are included in question d8 in the original questionnaire, which is omitted for reasons of space, and is available from the authors upon request.

  12. 12.

    These items are included in question d52 in the original questionnaire.

  13. 13.

    Distinguishing between Type A and Type B social cooperatives, we control for six Type A and 11 Type B service and product typologies. We further control for eight Type A and seven Type B user typologies.

  14. 14.

    Cannari and Iuzzolino (2009) calculate the cost of living by integrating the information provided by the Italian National Institute of Statistics (ISTAT) with data on other services (e.g. energy, public services, and transportation) from other official sources, and on real estate prices and rents. On this basis, they show that PPP correction raises the value of real wages in the south with respect to the centre and (even more so) to the north-east and north-west.

  15. 15.

    Unfortunately, the division between remunerated and unremunerated overtime hours is not available in the database.

  16. 16.

    A more direct check is obtained by estimating a regression where the number of extra hours is directly considered as a dependent variable. In this case, we have three significant and positive indicators (Table 4, line 4), which highlight the importance of pro-social, other regarding motivations in supporting the donative-labour hypothesis.

  17. 17.

    The results for type A and type B cooperatives only provide similar findings. They are omitted for reasons of space and available upon request.

  18. 18.

    Note that the second principal component has a much lower explanatory power (19 % of variance) but one which is still higher than one eigenvalue. When we include it in the estimate, however, its effect is not significant, and the impact of all other regressors is unchanged. Hence these results are omitted for reasons of space.

  19. 19.

    The significance of the first principal component is confirmed when the estimate is repeated for type A and type B cooperatives separately. In this case, the principal components are obviously recalculated on the restricted sample. The results are omitted for reasons of space and available upon request.

  20. 20.

    The results for type A and type B cooperatives only provide similar findings. They are omitted for reasons of space, and available upon request.

  21. 21.

    The impact of individual proxies of intrinsic motivations is positive and significant for all of the four relative effort measures for two indicators (RSE6 and RSE7), and is significant for all proxies of intrinsic motivations where the level of effort with respect to the needs of the social enterprise (EFF1) is considered.

  22. 22.

    Besides the positive effects on productivity and effort, intrinsic motivations are likely to be still more relevant to fostering worker well-being, in both its material and non-material components, as has already stated in the literature (Borzaga and Tortia 2006).

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Acknowledgements

We are gratefully indebted to Kaushik Basu, Avner Ben-Ner, Carlo Borzaga, Luigino Bruni, Benedetto Gui, Alois Stutzer, Robert Sugden, an anonymous referee and participants to seminars held in Trento and Rome for their comments and suggestions. The usual disclaimer applies. We are also grateful to EuRICSE (European Research Institute on Cooperative and Social Enterprises, Trento, Italy) and to its staff for data access and support. The survey on which the empirical analysis is based was carried out between March 2004 and February 2008 by five research units at the Universities of Brescia, Milan, Naples, Reggio Calabria and Trento. The survey was granted financial support by: (1) the Italian Ministry for University and Scientific Research (MIUR) awarded to the national research project (PRIN) titled: “The Economic Role of Nonprofit Organizations: New Theoretical Developments and Empirical Tests”, and (2) the Foundation of the Saving Bank of the Lombard Provinces (Ca.Ri.P.Lo. Foundation).

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Correspondence to Leonardo Becchetti.

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Becchetti, L., Castriota, S. & Tortia, E.C. Productivity, wages and intrinsic motivations. Small Bus Econ 41, 379–399 (2013). https://doi.org/10.1007/s11187-012-9431-2

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Keywords

  • Labor-donation
  • Intrinsic motivations
  • Productivity
  • Wages
  • Wage differentials
  • Non-profit

JEL Classifications

  • J30
  • J31
  • I30
  • L26