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Performance pay and low-grade stress: An experimental study.

Julia L Allan1, Keith A Bender2, Ioannis Theodossiou2

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Summary
This summary is machine-generated.

Performance-related pay (PRP) increases stress levels, as evidenced by higher cortisol levels and self-reported stress. This study demonstrates a causal link between PRP and objectively measured stress, suggesting potential adverse health effects.

Keywords:
Performance-related paycortisolreal-effort experimentstress

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Area of Science:

  • Occupational Health
  • Psychology
  • Economics

Background:

  • Existing economic literature suggests a link between performance-related pay (PRP) and ill health.
  • This link is contested due to potential endogeneity between PRP and health outcomes.
  • This study addresses endogeneity by experimentally investigating the causal impact of PRP on stress.

Purpose of the Study:

  • To investigate the adverse effects of performance-related pay on stress.
  • To determine if performance-related pay causally influences stress levels.
  • To examine stress as a determinant of physical health in the context of compensation.

Main Methods:

  • Forty subjects were randomly assigned to either a performance-related pay group or a flat fee group.
  • Objective stress was measured via cortisol levels in saliva samples.
  • Subjective stress was measured using self-reported stress levels, both pre- and post-experiment.

Main Results:

  • The performance-related pay group exhibited significantly higher objectively measured cortisol levels compared to the flat fee group.
  • Self-reported stress levels were also higher in the performance-related pay group, though less statistically significant than cortisol measures.
  • Cortisol levels demonstrated a statistically significant increase in the performance-related pay group, confirming a causal link.

Conclusions:

  • Performance-related pay demonstrably induces objectively measurable stress.
  • While self-reported stress aligns directionally, cortisol measurements provide statistically robust evidence of PRP's impact.
  • Individuals may underestimate the physiological stress induced by performance-related pay systems.