It may seem like common sense that if you want to lure better workers, you should pay higher wages. Yet employers and economic theorists alike aren’t sure that’s true, since high pay might attract job applicants who are in it just for the money. So what’s an employer to do? A recent field study from development economist Frederico Finan and colleagues provides an answer: Their research offers the first-ever experimental evidence that higher wages attract workers who are highly skilled and who hold a true interest in the organization’s cause.
The opportunity to conduct a study on real workers applying for real jobs came when the federal government of Mexico, in an attempt to improve public services in areas of the country with weak municipal governments, rolled out a program to hire a network of community-development agents. These agents would live in their assigned area, and their job would be to assess local needs and report these back to the federal government, explains Finan. The community-development agents would be somewhat like Peace Corps volunteers, says Finan, but they’d be recruited from within Mexico and paid for their work.
The program organizers firmly believed that they needed to pay above-average wages in order to draw skilled workers to these jobs, which were often located in remote and crime-ridden areas. Yet the organizers worried that a salary that was too high would attract people who were in it just for the money and not for the cause. That’s a serious concern, since people who are highly motivated to work in the public sector are known to perform better on the job. “If you offer one penny, you know that whomever you chose is there because they love the job,” says Finan. “But if you offer $100,000, you’ll get not only a lot more applicants, but also applicants of the type who are in it for the wrong reasons.”