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Performance pay and alcohol use in Germany

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  • Mehrzad B. Baktash
  • John S. Heywood
  • Uwe Jirjahn

Abstract

Previous studies show that performance pay can benefit firms and workers by increasing productivity and wages. Yet, performance pay can also have unintended consequences for worker health. Using data from the German Socio‐Economic Panel, we examine the hypothesis that alcohol use as “self‐medication” is a natural response to the stress and uncertainty associated with performance pay. We find that the likelihood of consuming each of four types of alcohol (beer, wine, spirits, and mixed drinks) is higher for those receiving performance pay even controlling for a long list of economic, social, and personality characteristics and in sensible instrumental variable estimates. We also show that the number of types of alcohol consumed is larger for those receiving performance pay and that the intensity of consumption increases.

Suggested Citation

  • Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2022. "Performance pay and alcohol use in Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 353-383, October.
    • Handle: RePEc:bla:indres:v:61:y:2022:i:4:p:353-383
    DOI: 10.1111/irel.12301
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    3. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2022. "Worker stress and performance pay: German survey evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 276-291.
    4. Artz, Benjamin & Heywood, John S., 2022. "Performance Pay and Work Hours: US Survey Evidence," IZA Discussion Papers 15412, Institute of Labor Economics (IZA).
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    6. Monica Roman & Klaus F. Zimmermann & Aurelian-Petrus Plopeanu, 2022. "Religiosity, Smoking and Other Risky Behaviors," Journal of Economics, Management and Religion (JEMAR), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-27, July.
    7. Green, Colin P. & Heywood, John S., 2022. "Does Performance Pay Influence Hours of Work?," IZA Discussion Papers 15474, Institute of Labor Economics (IZA).

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    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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