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Your Belief in Rewarding Teamwork Could Be Hurting Your Bonus and Regular Pay Plans

Source: Working Paper, National Bureau of Economic Research, October 2018

New research on workers’ preferred benefits may lead you to reconsider judging employees based on their team’s performance. Many people, particularly as they get older, are willing to give up a pay raise if they can work by themselves or—if they are on a team—get reviewed on their solo accomplishments. While many firms find that teams of workers with complementary skills can be more productive than people working alone, “there is little evidence about workers’ preferences for teamwork,” say the five authors of a paper published last fall by the National Bureau of Economic Research. “We estimate that working by oneself is an equivalent to an 8.4% wage increase relative to working on a team and being evaluated based on the performance of a team,” the authors wrote. “However, we find that most of the value of working by oneself arises from a desire to be evaluated based on one’s own performance rather than the team’s performance. Relative to evaluation as a team, evaluation based on one’s own performance—but still working on a team—is equivalent to a 6.4% wage increase. As long as evaluation for teamwork is based on one’s own performance, working alone is only valued at 2.0% of the wage.” The chart above shows how respondents to a nationwide survey answered when asked if they’d prefer getting a particular benefit rather than part of a pay raise. The higher the number, the greater the willingness. The results, based on surveys of 18,150 workers conducted from July 2015 to February 2016, indicates some things you probably already suspected. For instance, it’s probably no surprise that workers aged 62 or more value jobs with moderate physical activity or just sitting more than all others, particularly compared with 25- to 34-year-olds. Moving from a job requiring heavy physical activity to one in which the person is mostly sitting “is equivalent to a 12.0% wage increase while ‘moderate physical activity’ is valued at 14.9% of the wage,” the authors said.  All age groups see time off as a good substitute for pay. Ten days of paid time off is equivalent to a 16.4% wage increase,. Twenty days of paid time off is equivalent, on average, to a 23.0% wage increase.” Workers’ attitudes about being independent also shows in the results regarding how workers value the ability to set their own schedule. “We estimate that setting one’s own schedule is equivalent to a 9.0% wage increase,” with women putting an even higher value on the option, the authors wrote. Low-wage workers value job amenities a bit less than respondents in highest wage jobs. From worst job to best, the change is valued at 47.9% for lowest-wage workers and 61.4% for highest-wage workers. “Working conditions become increasingly important throughout the lifecycle …[and] both job amenities and preferences for job amenities rise throughout the wage distribution,” the authors wrote. “Our results suggest that amenities play a critical role in job choices. While we limit our attention to only a subset of workplace amenities, we nevertheless estimate that these characteristics compose an important component of compensation, suggesting a first-order role for non-wage amenities for understanding the level and structure of wages in the U.S. labor market.”

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