1. Comments on “Performance Pay, Wellbeing and Health” Colin Green Lancaster University “What’s the Big Deal with Pay for Performance?” Workshop 26 June 2014 Keith Bender University of Aberdeen

2. Context Fits well into the growing literature on other effects (unintended consequences?) of PRP – Real motivation – why don’t we see more PRP if theoretical benefits regarding productivity are so strong? Colin offers two sets of estimates: – ‘Traditional’ topics: PRP correlated with more hours and (possibly) pay – ‘Non-traditional’ topics: PRP positively correlated with SWB PRP positively correlated with injuries; no effect on overall subjective health PRP may be correlated with less (satisfaction with) leisure PRP does not look to be correlated with marriage instability

3. General Comments Changing Behaviour – Increased hours – Increased risk Firm incentive – do they want more risk neutral workers or risk loving workers? Theoretical – – Can you draw a diagram with two types of workers with relative risk aversion to show that PRP leads to this kind of sorting? – What kind of implications does this mean for the CWD for uncertainty of income stream? Empirical – can you correlate PRP with measures of risk? – BHPS has info on smoking, gambling winnings, introvert/extrovert personality

4. Estimates Exposure rather than contemporaneous effects – PRP is associated with bump in pay, but is that ‘worth’ the extra stress? – Even if ‘contemporaneous’ may be better to have last period PRP in e.g. current health regressions Leisure – Can probably tease out some time element: exercise, ‘keep fit’, drinking behaviours

5. Marriage and PRP Example of great minds thinking alike! Increased hours and stress => increase odds of divorce Higher pay => lower odds of divorce Selection issues? – More risk loving stay in marriages or more likely to end marriages?? Slightly higher odds of divorce if spent 50% of time or more in PRP 0.00 0.25 0.50 0.75 1.00 0246810 analysis time perfpercent50plus = 0perfpercent50plus = 1 Kaplan-Meier survival estimates

6. Marriage and PRP con’d Preliminary regressions show a complicated picture Marginal significance indicating lower odds of divorce compared to nonPRP Significantly higher odds when looking at subsample who have been exposed to PRP More work to be done here!