Wednesday, May 5, 2021
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Economics Lecture Showcases Findings

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John Heywood from the University of Wisconsin in Milwaukee spoke on a performance pay study in Bayley Auditorium last week.

Heywood, Benjamin Artz and Colin Green did a study on performance pay and how it affects drugs and alcohol use.

They found “substance use is greater by those on performance pay, best efforts to account for sorting by ability or risk preferences does not change that, this does not seem to be driven by depressive characteristics and it is far less obvious (or even absent) for nonwhite men,” Heywood said.

Heywood said performance pay is controversial because some businesses like it, some don’t and there is controversy whether performance is a more fair approach to pay.

Firms either really care or really don’t care about performance pay for their company and how there have been studies on how performance pay harms health and increases injuries, but nothing like this on the use of drugs and alcohol, Heywood said.

Heywood used truck drivers as an example of how performance pay can be harmful—if truck drivers are paid for how much work they do instead of by the hour. This means the faster they get something delivered, they more they get paid; this makes truck drivers drive faster and can cause more accidents, injuries and harm health.

“[I found] the correlation with high stress jobs increases the use of substance the most interesting,” Whitney Hoover, ’20, said.

Sarah Auble, ’20, found the results of the nonwhite male study interesting. She isn’t a fan of performance pay because it seems unethical and reminds her of pyramid schemes.

Hoover also disagrees with performance pay, because she thinks that if people believe that if they work harder, they will get paid more and this can be harmful and dangerous. However, she said she can see how it can be beneficial, but she thinks there should be some kind of regulation with performance pay, so people aren’t driven to substance use.

The study ran through self-reported measures and binary responses to see whether people consumed marijuana, cocaine, crack, heroin, crystal meth or alcohol in the last 30 days.

Some potential implications with their study was “what appears to be a return on increased productivity may, in part, be a compensating differential for workplace stress and the extent the costs of substance use are not captured inside the employment relationship there may be a rationale for either/or regulating the application of performance pay and increasing access to medical care,” Heywood said.

According to Heywood, performance pay was split up into tips, commission, bonuses, incentive pay and an other category for the purpose of their study.

Heywood argued risk takers have a better chance of drug and alcohol use.

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