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Why do workers work? Inequality and collective benefits in organisational production experiments

Abstract

Laboratory experiments in a simulated firm comprising an investor and two workers were performed to examine how different incentives of self-interest, wage inequality, employer–employee inequality, or collective benefits affect worker performance in an organisational production. The findings indicate that workers given their own wage information only lose their incentives to make efforts as game goes on for their selfish incentives. Workers with information pertaining to unequal wages performed significantly lower than equally waged workers due to impaired cooperation. Equally paid workers showed higher levels of cooperation with their paired workers in their production as well as ‘boycotting’ behaviour due to enhanced aversion to employer–employee inequality. However, workers who are given collective information on total wages and firm revenues rendered the highest effort levels in response to enhanced incentives to achieve collective benefits for an organisation, regardless of lower wage and employer–employee inequalities. The experimental results indicated that workers are not only motivated by selfishness or fair treatment, but also aim to contribute to an organisation, of which they are a part of.

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Acknowledgements

My cordial thanks go to Professor Ai Takeuchi, Mr Tetsuya Tamura, and EIER anonymous referees for providing fruitful comments and criticisms. All errors are mine.

Funding

This study was funded by Ritsumeikan University.

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Correspondence to Natsuka Tokumaru.

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Conflict of interest

Author Natsuka Tokumaru declares that she has no conflict of interest associated with this manuscript.

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This article does not contain any studies with animals performed by any of the authors. All procedures performed in studies involving human participants were in accordance with the ethical standards of the Japan Society for the Promotion of Science  and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards.

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Informed consent was obtained from all individual participants included in the study.

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Appendix

Appendix

Instruction for economic experiment

Thank you very much for attending this economic experiment. An experimenter will now explain the rules of the game. Please read the instructions below carefully to ensure you understand the rules of the game. You can raise your hand to ask a question at any time should anything be unclear.

  1. 1.

    Handouts

Please check that all handouts are on the table in front of you: an instruction page, a blank sheet of paper, and a sheet for writing a distribution proposal.

  1. 2.

    Participation fee

You will receive 1000 points (equivalent to 1000 yen) as a participation fee, simply by attending and participating in this game. This base participation fee will be paid to all participants regardless of the total points they earn in the game.

  1. 3.

    Investors and workers

All participants are randomly assigned either the role of investor or worker. In the beginning of a game, your role as either an investor or a worker will be displayed on your screen. No participants, including any experimenter, can know who is an investor or a worker, or who is paired with whom, either during or after the experiment.

Half of investors are played by actual participants, and the other half of investors are played by a computer. An investor gains his/her profit by investing his/her investment fund to wage and capital investment and company’s benefit, whereas workers gain his/her profit by receiving wages and engaging in computation tasks.

  1. 4.

    Three-player companies

All participants constitute a company consisting of one investor and two workers. Company members are randomly allocated by a computer. Each company has a name such as Strawberry, Apple, Grape, Banana, Kiwi, Mango and so on. All participants and experimenters are not allowed to know who belongs to which company both during and after the experiment.

  1. 5.

    Investment fund [investor]

An investor receives 900 points (equivalent to 900 yen) as investment funds for each period. An investor has to allocate all the investment funds either to wages for workers in his/her company or to capital investment in 100-yen increments.

  1. 6.

    Wage decision [investor]

Workers’ wage is fixed at 300 yen in the first period, thus investors do not need to set wages in the first period. Starting in the second period and every period thereafter, investors are required to set the wage for each worker of his/her company. On the investors’ screens for wage input, each worker is displayed as ‘worker A’ or ‘worker B’ with a wage entry form for each. Those who are assigned roles as investors, please set wages for each worker and enter them in the forms. (The following sentence is added in wage-equal treatment: ‘Wages for two workers should be equal’).

Please click the ‘OK’ button after entering wages. Wage should be entered in 100-yen increments, and should not be less than 100 yen. Total combined wage for both workers should not exceed 600 yen. A screen for wage input is not displayed in the first period. Disclosure for Wage Information [workers]: After wage setting by investors, each worker’s wage is displayed on their screen. A worker automatically receives 300 points for the first period. Please click the ‘OK’ button after checking your wage.

  1. 7.

    Computation tasks [workers]

A chat box in the left side and 50 computation tasks in the right side are displayed on the worker’s next screen. There are two types of computation tasks, which differ among workers who belong to the same company. In the computation tasks for one worker, 1 or 2 digit numbers are displayed in the odd-numbered questions (Q1, Q3, Q5…), and ‘A2, A4, A6…’ are displayed in even-numbered questions. The other worker has the opposite information. That is, for the other worker, 1 or 2 digit numbers are displayed in even-numbered questions (Q2, Q4, Q6…), and ‘A1, A3, A5…’ are displayed in the odd-numbered questions. The answers for computation tasks are acquired by multiplying 8 by the given 1–2 digit numbers, or by the corresponding answers from the other worker. AX denote answers for question QX (number gained by multiplying 8 with 1–2 digit) displayed in the other worker’s screen (see table below). One can move the cursor to the entry form for next computation task by pressing the Tab key.

Questions displayed for worker AAnswers for worker AQuestions for worker BAnswers for worker B
Q1. 12Q1. 96 (= 12 × 8)Q1. A1Q1. 768(= 96 × 8)
Q2. A2Q2. 4992(= 624 × 8)Q2. 78Q2. 624(= 78 × 8)

To inform one’s paired worker the numbers of AX, workers must communicate with each other via the chat box. One can send a message to his/her pair by entering a message into the form in the bottom of chat box and pressing the ‘Enter’ (please do not confuse the key with the ‘OK’ button.). Please enter the figures in one byte characters. In the case contents of the chat become too long, one can scroll to the latest of previous messages using the bar on the screen or the scroll wheel in the centre of the mouse. One can gain 4 points by giving the right answer for a question of a 1–2 digit number, and 16 points for giving the right answer for a question with AX. You can use the white paper on the desk for your calculation. Time for computation tasks is 10 min. Please stop your computation tasks and click the ‘OK’ button when an instructor says ‘10 min have passed, please finish your current computation task and click the ‘OK’ button’. Please do not click the ‘OK’ button until this notification.

  1. 8.

    Capital investment [investor]

An investor can magnify their capital by investing their remaining investment funds to capital after paying wages. The amount of additional capital is determined by the amount invested, as is shown in the table below. For instance, if an investor’s wage expense for workers is 500 points, capital investment will be 400 points, and he/she will gain 1.7 times their investment. A company’s income is calculated by multiplying worker’s production income with the corresponding investment coefficient. Investor’s income is calculated by deriving wages from company’s profit. For instance, in a case where total wages for workers are 600 points, and capital investment is 300 points, the investment coefficient is 1.5, and with a total worker production of 600 points, the company’s income will be 900 points (total production 600 × investment coefficient 1.5). Investor’s profit in this case will be 300 points, i.e. the amount gained by subtracting wages (600) from the company’s income (900).

Capital investmentInvestment coefficient
1001.1
2001.3
3001.5
4001.7
5001.9
6002.1
7002.3

After deciding wages, amount of capital investment, and investment coefficient, 50 questions of computation tasks are displayed on the investor’s screen. Questions for computation tasks display 1–2 digit numbers, and correct answers are gained by multiplying 8 with these numbers. In the case the percentage of correct answers does not exceed 50%, the investment coefficient will be halved. For instance, in a case where the investment coefficient is 1.7 and the percentage of correct answers does not exceed 50%, the investment coefficient will be 0.85. Please enter the figures in one byte characters.

Time for doing computation tasks is 10 min. Please stop your computation tasks and click the ‘OK’ button when an experimenter says ‘10 min have passed, please finish computation tasks and click the ‘OK’ button’. Please do not click the ‘OK’ button until instructor’s notification.

  1. 9.

    Information disclosure of production [investor]

After finishing labour production and the investor’s capital investment by investor, an investor receives information on his/her company’s wages, production for each worker (displayed as worker A, worker B), capital investment, investment coefficient and the company’s income via screen.

  1. 10.

    Information disclosure of production [worker]

(Individual treatment After finishing labour production and the investor’s capital investment, a worker receives information on his/her production via screen.

(Equal treatment) After finishing labour production and the investor’s capital investment, a worker receives information on his/her and his/her pair’s productions via screen.

(Wage-equal treatment) After finishing labour production and the investor’s capital investment, a worker receives information on his/her and his/her pair’s wages and productions via screen.

(Collective treatment) After finishing labour production and the investor’s capital investment, a worker receives information on company’s total wages and production via screen.

  1. 11.

    Information on income of each company [investor]

After information disclosure on one’s own company, information on all companies—company’s name, wage, labour production, investment coefficient, and company’s income—is displayed on the investor’s screen in order from the company with highest income to the lowest.

  1. 12.

    Final profit

In the end of the period, your final profit (wage for workers, and the amount calculated by subtracting total wages from company’s income for investors) is displayed on your screen.

  1. 13.

    Decision for game continuation

After finishing a period (other than 1st period), an instructor decides whether to continue the game or not by rolling a dice. In the case of rolling a 1, 2, 3, 4 or 5 on the dice, the game will be continued. In the case a 6 is rolled, the game will be ended. However, in the case the total periods played are less than 6 periods, the game will be restarted with a switched investor in each company (workers won’t be switched). Please click the ‘OK’ button after game continuation has been decided.

  1. 14.

    Decision for payment

After finishing game, an experimenter randomly selects three periods after the first period by drawing three cards. The base participation fee plus the profit of the first period and the three selected periods becomes your final payment. For instance, in the case 6 periods are played in the game, and an instructor draws cards 2, 4, 6 from cards 2, 3, 4, 5, 6, your final payment will be the sum of the base participation fee and the profit of 1st, 2nd, 4th, and 6th periods.

  1. 15.

    Exercise

Before starting a game, participants will practise computation tasks in pairs.

  • Please raise your hand if anything is unclear or have any questions.

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Cite this article

Tokumaru, N. Why do workers work? Inequality and collective benefits in organisational production experiments. Evolut Inst Econ Rev 16, 375–396 (2019). https://doi.org/10.1007/s40844-019-00127-3

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  • DOI: https://doi.org/10.1007/s40844-019-00127-3

Keywords

  • Organisational production
  • Wage inequality
  • Employer–employee inequality
  • Labour productivity
  • Collective benefit

JEL Classification

  • D9
  • L2
  • J3
  • J5