Earning Honor or Money? Self-Selection of Motivated Workers

Abstract

How is a worker's choice of employer affected by the wage in a context where job-specific motivation matters? In contrast to standard theory we conjecture that higher wages do not necessarily attract the right workers. Specifically, we hypothesize that mission-oriented organizations should pay wages below the market wage: Hereby, the organization will attract only those applicants that genuinely care about the organization and not so much about the wage. We test this selection mechanism in a laboratory experiment in which subjects face a choice between two jobs. This choice represents a trade-off between personal monetary payoff and a contribution to a prominent mission-oriented organization. We find that a higher monetary wage gap leads to a smaller, but significantly more intrinsically motivated applicant pool for the missionoriented job. However, effort that workers exert remains unchanged. We conclude that mission-oriented organizations profit from underpaying relative to the market wage.

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