Can Companies Pay Less By Doing Good?

Published June 2, 2016

2016-06-02 19:13:01

Based on “Social Responsibility Messages and Worker Wage Requirements: Field Experimental Evidence from Online Labor Marketplaces,” forthcoming, Organization Science.

Companies continue to invest in and place importance on corporate social responsibility (CSR). Yet the question remains, how can firms “do well by doing good”? What are the mechanisms through which CSR influences firm performance? Though studies have examined the role of external stakeholders in linking CSR and firm performance, relatively little attention has been paid to the role of internal stakeholders, despite the importance of human capital to firm performance. In this paper, I explore one mechanism through which firms could do well by doing good: by paying workers less.

I use natural field experiments implemented in two online labor marketplaces to provide causal evidence that receiving information about an employer’s social responsibility reduced prospective workers’ wage requirements for a job. My research settings were the online labor marketplaces of two employers: a fictitious company hiring on Amazon Mechanical Turk (in one experiment) and a real startup company hiring on Elance (in a second experiment). In each experiment, workers were recruited online for short-term jobs. I manipulated whether or not the worker received information about the employer’s social responsibility, and then observed the payments they were willing to accept. I found that receiving information about the employer’s social responsibility caused workers to accept lower payments for the same job, and that higher performing workers were most responsive.

Why are workers willing to forego part of their payment to work for a socially responsible employer? I use survey data to begin to explore the mechanism driving willingness to forego wage in the first experiment, finding evidence that the mechanism was that they interpreted the socially responsible message as a signal that the employer was trustworthy and would treat the prospective worker fairly. In contrast to the view that it is altruistic, prosocial individuals who are responsive to social responsibility, a mechanism of signaling about employee treatment implies that even purely self-interested, non-prosocially oriented individuals prefer socially responsible employers – everybody prefers to be treated better.

Lastly, this paper serves as an example of how online labor marketplaces can be leveraged as settings for randomized experiments to study inputs to worker outcomes, with potential for similar methodology to be applied to other questions relevant to management and strategy literature. Prior research has used online labor marketplaces as alternatives to lab experiments where participants are told they are participating in a research study, but they have been underutilized as settings in which to implement natural field experiments (where participants are unaware they are taking part in a study). Only very recently have researchers began to tap their potential as field experimental settings to study inputs to worker motivation and output. Furthermore, as the management of online workers, independent contractors, and other non-inhouse workers is becoming increasingly important to the firm, online labor marketplaces will become increasingly relevant settings.

Vanessa C. Burbano is an Assistant Professor of Management at the Columbia Business School.

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