Skip to main content

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

Economics: Slow and steady

J. Labor Econ. 35, 299–344 (2017)

Although recent US labour market statistics show favourable employment numbers, wage stagnation is ongoing and contributes to recent discussions about minimum wage standards. Wage increases counteract inflation and allow employees to meet increasing costs of living, but their dynamics also have potentially important performance effects.

Credit: GEORGECLERK/E+/GETTY

A new study by Dirk Sliwka, at University of Cologne, and Peter Werner, at Maastricht University, examined how workers' performance was affected by the timing of wage increases. Participants were assigned to one of two roles: the principal (that is, ‘employer’) selected from one of four income schedules on which to pay the agent (‘employee’) as compensation for repeatedly performing a tedious task. They found that a small, continuously increasing wage profile resulted in higher consistent productivity gains than either a single sizeable increase or steady payments, but only when they were not anticipated in advance. Crucially, total wages earned were the same across all conditions. These findings are consistent with a model that adjusts performance with respect to an evolving reference wage, informed by recent earnings, and echoes work in psychology on hedonic treadmills.

Although this study suggests that the timing and frequency of wage increases affect productivity, it also shows an effect of absolute wage levels, suggesting a potential rationale for higher wages as well as steady wage increases.

Authors

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Constantino, S. Economics: Slow and steady. Nat Hum Behav 1, 0090 (2017). https://doi.org/10.1038/s41562-017-0090

Download citation

  • Published:

  • DOI: https://doi.org/10.1038/s41562-017-0090

Search

Quick links

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing