A man applies for a job, which requires him to undergo three days of testing. But just before the testing period begins, he gets another good job offer. How does this affect his effort and performance?
If you’ve got your economics-blinders on, you’ll probably answer: Once he’s got an offer in hand, he won’t try as hard and therefore won’t do as well. But Michigan grad student Susan Godlonton decided to put that theory to the test. She was here in Rochester this week to tell us what she learned.
Godlonton did her research in Malawi, where her research funds went a long way. 278 job applicants were recruited for a three-day training program, with job offers contingent on their performance. At the beginning of the training period, about 20% of the applicants (randomly chosen) were offered an alternative job; another 20% were randomly told they’d not be getting the alternative offer. (Still others were told they had various probabilities of receiving the alternative offer, but let’s concentrate on the extremes.) These alternative offers were kept secret from the evaluators at the training session.
The result: After controlling for background characteristics such as performance on standardized tests, previous experience, age, and so forth, applicants with no outside offer perform considerably worse in the training sessions, as measured by written exams, and the quantity and quality of their verbal participation. Those with alternative offers are 11.3% more likely to make verrbal contributions, and their verbal contributions are better.
So what’s the deal here? Does the guaranteed job offer inspire applicants to work harder? Nope. Those with guaranteed jobs spend, on average, an extra 53 minutes a day watching television (according to their diaries), and correspondingly less time studying the training manuals. In other words, they’re expending less effort (as you’d predict if you were economist) but still doing better (as you might predict if you were a psychologist knowledgeable about the effects of stress).
This is, I think, fascinating stuff. There’s much more in Godlonton’s paper (this is Chapter One of three in her doctoral dissertation). Do you have an alternative explanation? And what does this mean for the way labor markets ought to work?