If I double your salary, will you work twice as hard? Maybe, but likely not. What if I just increase your salary by a substantial amount, will you work any harder? Some people will for some finite time before reverting to their prior level of exertion; other people will accept the raise but not work any harder than beforehand; and still others might lower their level of on-the-job effort.
Why isn’t there a universal positive linear relationship between work motivation, effort, and pecuniary reward? How can there be a parabolic relationship, or even an inverse relationship whereby workplace motivation and effort tend to wane in the face of higher earnings? The notion that offering workers the possibility of earning more money merely causes a transient increase in work motivation and effort, or even a decline, seems counterintuitive. How can paying people more ultimately worsen some employees’ workplace motivation?
This is especially puzzling for some economists who faithfully believe in the existence of an omnipotent species known as homo economicus, and a consequent claim that workers can always be incentivized to work harder and exhibit greater productivity if employers pay what’s known as a ‘minimum efficiency wage’.
From the vantage point of cognitive social and organizational psychologists however, this phenomenon is less puzzling and can cogently be explained by what’s come to be known as Motivational Crowding Out. The explication of that phenomenon, Motivation Crowding Theory, recognizes that workers are animated by several distinct sources of motivation. These motivational wellsprings can act in compliment, or at cross purpose, depending on the individual, the environmental or social context, and how the reward or incentive structure is set up.
Research and real-world experiences have shown that some ways of structuring incentives are more likely to cause friction between different types of motivation, such that one type of motivation tends to supplant other forms of motivation, often leading to unintended and undesirable outcomes. This is especially true when monetary payment is perceived as changing the rules of the game, or negating the normative obligation of reciprocity.
Generalizing somewhat, the two most important motivational forces that animate workers to initiate, actively engage in, and sustain work effort are (1) external rewards and extrinsic motivation on the one hand, and (2) intrinsic motivation on the other. Extrinsic motivators are job incentives that are external to the work itself, like wages, salaries, promotions, job security, or the approbation of getting an employee-of-the-month award. Intrinsic motivation means enjoying the job itself, and especially the nature or type of work.
So how can paying people more money to exert greater effort on the job, or offering token external rewards when people would be willing to make ‘social sacrifices’ for free, backfire and have adverse consequences? Or even have the exact opposite effects from what was intended? Several explanations have been suggested and investigated, including:
– Performance contingent pay deprives people of autonomy and imposes a sense of being controlled, thereby crowding out intrinsic motivation (which is fostered by autonomy and feeling competent). Conversely, unexpected and non-contingent financial rewards, that are not perceived as too controlling, can complement intrinsic motivation because the reward is taken as equivalent to positive feedback or an expression of appreciation.
– Offering token sums can commodify what had hitherto been a socially respected and laudable norm. For example, researchers have found that local residence facing potential harm due to situating an undesirable but necessary infrastructure projects are more likely to display ‘NIMBYism’ if they’re offered token sums of money as compensation, rather than beseeching their sense of social responsibility.
– Putting a price on certain behaviors can change the rules of the game by commodifying relationships that had previously been exemplified by reciprocity norms. Payment commercializes relationships and underpins impersonal transactions.
– Paying people can deprive them of a sense of moral loftiness, of their ability to view themselves as altruistic, caring, or virtuous. In economics, this confounding of two sources of utility from prosocial behavior – the benefit of performing a virtuous act, and being able to feel good about oneself for having performed a moral act – has been called ‘warm glow’ or ‘impure altruism’.
– Paying someone can come off as a slight, or even as a grave insult. This is especially true when the offered sum is very small, and when social convention would usually preclude any commodified transaction. For example, paying trivial sums to a friend for ordinary friendly favors can be viewed as tacky or belittling. However, if the offered sum is adequately large, people may be more willing to tolerate the slight if the financial reward more than compensates for feeling insulted.
– After paying people to engage in activities they previously found intrinsically interesting, they will no longer partake in that activity – or, not to the same extent – without further financial compensation. That intrinsic interest has been spoiled or corrupted.
So, it turns out that whether extrinsic rewards are undermining of intrinsic motivation depends on preexisting social norms, the level and type of compensation (a mere token; enough to overcome the feeling of being slighted; performance contingent versus fixed sums etc.). Getting paid more money doesn’t mean we’ll always work harder, and it certainly cannot substitute for intrinsic motivation. Rather, extrinsic rewards, especially when perceived as controlling, commodifying, or denigrating, can potentially displace, or crowd out preexisting intrinsic motivation, often to detrimental effect.
Ultimately, we need to appreciate that ill-conceived monetary incentives may lead to the crowding out of innate, intrinsic motivation if the remuneration undermines workers’ sense of autonomy, or their commitment to achieving socially beneficent outcomes, or the offered sum is regarded as a pittance, or is seen as an insult. Even in the workplace then, money isn’t everything. As such, pay and compensation can leave us feeling commodified; it potentially undermines our willingness to engage in otherwise enjoyable work for its own sake, or to work on behalf of other people.
For those who want to read more:
Deci, Edward L, Richard Koestner, and Richard M. Ryan. 1999a. A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation. Psychological Bulletin 125(6): 627 – 668.
Deci, Edward L, Richard Koestner, and Richard M. Ryan. 1999b. The Undermining Effect Is a Reality After All—Extrinsic Rewards, Task Interest, and Self-Determination: Reply to Eisenberger, Pierce, and Cameron (1999) and Lepper, Henderlong, and Gingras. Psychological Bulletin 125(6): 692 – 700.
Festre, Agnes, and Pierre Garrouste. 2015. Theory and Evidence in Psychology and Economics About Motivation Crowding Out: A Possible Convergence? Journal of Economic Surveys 29(2): 339 – 356.
Frey, Bruno, and Rene Jegen. 2001. Motivation Crowding Theory. Journal of Economic Surveys 15(5): 589 – 611.
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