Wage Experiment in India Shows True Price of Unequal Pay – India Real Time – WSJ

When workers are paid differently for little reason, even the higher-paid ones are less productive and happy, a new study suggests.

Economists at Columbia University and University of California, Berkeley, have shown that workers seem to be highly averse to pay inequality, just as primatologist Frans de Waal’s capuchin monkeys famously threw food at their keepers when they were rewarded differently.The new study reveals a sharp drop in output, attendance and social cohesion among groups of workers paid differently compared with groups where everyone was paid the same.

In a study the authors claims is the largest such experiment ever conducted, 378 Indian workers—with differing levels of productivity—were trained and hired into month-long seasonal contract jobs, working in factories that produced low-tech items such as ropes and brooms.

They were organized in teams of three workers. All 378 were paid either 240 rupees ($3.59) a day to turn up to work, or 5% more or 5% less than that amount.

In most of the teams, the three workers were paid the same amount. But, crucially, in some, workers’ pay differed according to the workers’ individual levels of productivity (which had been determined earlier). This clever design meant the economists could compare the performance of workers who earned the same amount—either high, middle or low—but differed according to whether they were members of equally or unequally paid teams.

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Source: Wage Experiment in India Shows True Price of Unequal Pay – India Real Time – WSJ

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