IDEAS home Printed from https://ideas.repec.org/p/zbw/glodps/1677.html
   My bibliography  Save this paper

Performance Pay and Happiness: Work vs. Home?

Author

Listed:
  • Baktash, Mehrzad B.
  • Heywood, John S.
  • Jirjahn, Uwe

Abstract

Using German survey data, we show conflicting influences of performance pay on overall life satisfaction. The overall influence reflects a strong positive influence through domains of life satisfaction associated with the job (job satisfaction, individual earnings satisfaction and household earning satisfaction) and a strong negative influence through domains away from the job (health satisfaction, sleep satisfaction and family life satisfaction). This trade-off between work and home generalizes and helps explain many previous studies examining much more specific consequences of performance pay. Finally, controlling for the mediating role of the domains, the direct influence on life satisfaction is positive for women and insignificantly different from zero for men.

Suggested Citation

  • Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2025. "Performance Pay and Happiness: Work vs. Home?," GLO Discussion Paper Series 1677, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1677
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/328276/1/GLO-DP-1677.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. K. Pouliakas & I. Theodossiou, 2009. "Confronting Objections To Performance Pay: The Impact Of Individual And Gain‐Sharing Incentives On Job Satisfaction," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 662-684, November.
    2. Layard, Richard & Chisholm, Dan & Patel, Vikram & Saxena, Shekhar, 2013. "Mental Illness and Unhappiness," IZA Discussion Papers 7620, Institute of Labor Economics (IZA).
    3. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 1-49.
    4. Keith Bender & Colin Green & John Heywood, 2012. "Piece rates and workplace injury: Does survey evidence support Adam Smith?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 569-590, January.
    5. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    6. D'Ambrosio, Conchita & Clark, Andrew E. & Barazzetta, Marta, 2018. "Unfairness at work: Well-being and quits," Labour Economics, Elsevier, vol. 51(C), pages 307-316.
    7. Grund, Christian & Sliwka, Dirk, 2010. "Evidence on performance pay and risk aversion," Economics Letters, Elsevier, vol. 106(1), pages 8-11, January.
    8. Colin P. Green & John S. Heywood & Parvinder Kler & Gareth Leeves, 2018. "Paradox Lost: The Disappearing Female Job Satisfaction Premium," British Journal of Industrial Relations, London School of Economics, vol. 56(3), pages 484-502, September.
    9. 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.
    10. Heywood, John S. & Jirjahn, Uwe & Struewing, Cornelia, 2017. "Locus of control and performance appraisal," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 205-225.
    11. Heywood, John S. & Wei, Xiangdong & Ye, Guangliang, 2011. "Piece rates for professors," Economics Letters, Elsevier, vol. 113(3), pages 285-287.
    12. Bruno S. Frey, 2018. "Economics of Happiness," SpringerBriefs in Economics, Springer, number 978-3-319-75807-7, March.
    13. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    14. Benjamin Artz & John S Heywood, 2024. "Performance pay and work hours: US survey evidence," Oxford Economic Papers, Oxford University Press, vol. 76(3), pages 609-627.
    15. Mary C. Daly & Daniel J. Wilson, 2009. "Happiness, Unhappiness, and Suicide: An Empirical Assessment," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 539-549, 04-05.
    16. Nick Bloom & Tobias Kretschmer & John Van Reenen, 2011. "Are family-friendly workplace practices a valuable firm resource?," Strategic Management Journal, Wiley Blackwell, vol. 32(4), pages 343-367, April.
    17. Green, Colin P. & Heywood, John S., 2023. "Performance pay, work hours and employee health in the UK," Labour Economics, Elsevier, vol. 84(C).
    18. David G. Blanchflower & Alex Bryson, 2024. "Seasonality and the female happiness paradox," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(1), pages 1-33, February.
    19. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, vol. 101(2), pages 556-590, April.
    20. Cornelissen, Thomas & Heywood, John S. & Jirjahn, Uwe, 2011. "Performance pay, risk attitudes and job satisfaction," Labour Economics, Elsevier, vol. 18(2), pages 229-239, April.
    21. Victor Lavy, 2009. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics," American Economic Review, American Economic Association, vol. 99(5), pages 1979-2011, December.
    22. Daniel Parent, 1999. "Methods of Pay and Earnings: A Longitudinal Analysis," ILR Review, Cornell University, ILR School, vol. 53(1), pages 71-86, October.
    23. Easterlin, Richard A. & Sawangfa, Onnicha, 2007. "Happiness and Domain Satisfaction: Theory and Evidence," IZA Discussion Papers 2584, Institute of Labor Economics (IZA).
    24. Andrew E. Clark, 2018. "Four Decades of the Economics of Happiness: Where Next?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 245-269, June.
    25. Tuomas Pekkarinen & Chris Riddell, 2008. "Performance Pay and Earnings: Evidence from Personnel Records," ILR Review, Cornell University, ILR School, vol. 61(3), pages 297-319, April.
    26. Jirjahn, Uwe & Mohrenweiser, Jens, 2025. "Management Practices, Workplace Health Promotion and Productivity," GLO Discussion Paper Series 1643, Global Labor Organization (GLO).
    27. Krueger, Alan B. & Schkade, David A., 2008. "The reliability of subjective well-being measures," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1833-1845, August.
    28. David G. Blanchflower & Alex Bryson, 2024. "The female happiness paradox," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(1), pages 1-27, March.
    29. Allan, Julia L. & Andelic, Nicole & Bender, Keith A. & Powell, Daniel & Stoffel, Sandro & Theodossiou, Ioannis, 2021. "Employment contracts and stress: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 360-373.
    30. Clark, Andrew E., 1997. "Job satisfaction and gender: Why are women so happy at work?," Labour Economics, Elsevier, vol. 4(4), pages 341-372, December.
    31. Uwe Jirjahn & Jens Mohrenweiser, 2025. "Variable Payment Schemes and Productivity: Do Individual‐Based Schemes Really Have a Stronger Influence Than Collective Ones?," Kyklos, Wiley Blackwell, vol. 78(4), pages 1316-1332, November.
    32. Jed DeVaro, 2022. "Performance pay, working hours, and health‐related absenteeism," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 327-352, October.
    33. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 447-463, July.
    34. Bruce Shearer, 2004. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 513-534.
    35. van Praag, B. M. S. & Frijters, P. & Ferrer-i-Carbonell, A., 2003. "The anatomy of subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 51(1), pages 29-49, May.
    36. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
    37. Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2025. "Variable pay and work hours: does performance pay reduce the gender time gap?," Economica, London School of Economics and Political Science, vol. 92(368), pages 1149-1167, October.
    38. Anne Gielen & Marcel Kerkhofs & Jan Ours, 2010. "How performance related pay affects productivity and employment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 291-301, January.
    39. Benjamin Artz & Colin P. Green & John S. Heywood, 2021. "Does performance pay increase alcohol and drug use?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 969-1002, July.
    40. John S. Heywood & Patrick L. O’Halloran, 2005. "Racial Earnings Differentials and Performance Pay," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    41. Andelic, Nicole & Allan, Julia & Bender, Keith A. & Powell, Daniel & Theodossiou, Ioannis, 2024. "Does How You Get Paid at Work Affect Your Time off Work? The Relationship between Performance-Related Employment Contracts and Leisure Activities," IZA Discussion Papers 16886, Institute of Labor Economics (IZA).
    42. 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.
    43. Miles S. Kimball & Robert J. Willis, 2023. "Utility and Happiness," NBER Working Papers 31707, National Bureau of Economic Research, Inc.
    44. Nicole Andelic & Julia Allan & Keith A. Bender & Daniel Powell & Ioannis Theodossiou, 2024. "Performance‐related pay, mental and physiological health," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(1), pages 3-25, January.
    45. Colin Green & John S. Heywood, 2008. "Does Performance Pay Increase Job Satisfaction?," Economica, London School of Economics and Political Science, vol. 75(300), pages 710-728, November.
    46. Sarah Brown & John G. Sessions, 2003. "Attitudes, Expectations and Sharing," LABOUR, CEIS, vol. 17(4), pages 543-569, December.
    47. Clark, Andrew E., 2001. "What really matters in a job? Hedonic measurement using quit data," Labour Economics, Elsevier, vol. 8(2), pages 223-242, May.
    48. Pouliakas, Konstantinos & Theodossiou, Ioannis, 2009. "Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain-sharing Incentives on the Job Satisfaction of British Employees," MPRA Paper 14244, University Library of Munich, Germany.
    49. Uwe Jirjahn & Gesine Stephan, 2004. "Gender, piece rates and wages: evidence from matched employer--employee data," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 28(5), pages 683-704, September.
    50. Richard A. Easterlin & Onnicha Sawangfa, 2009. "Happiness and Domain Satisfaction: New Directions for the Economics of Happiness," Chapters, in: Amitava Krishna Dutt & Benjamin Radcliff (ed.), Happiness, Economics and Politics, chapter 4, Edward Elgar Publishing.
    51. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
    52. Uwe Jirjahn, 2016. "Performance Pay and Productivity: A Note on the Moderating Role of a High‐wage Policy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(7), pages 507-511, October.
    53. Clara Viñas-Bardolet & Monica Guillen-Royo & Joan Torrent-Sellens, 2021. "Correction to: Job Characteristics and Life Satisfaction in the EU: a Domains-of-Life Approach," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 16(5), pages 2283-2286, October.
    54. Bruno S. Frey, 2008. "Happiness: A Revolution in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062771, December.
    55. Layard, Richard & Chisholm, Dan & Patel, Vikram & Saxena, Shekhar, 2013. "Mental illness and unhappiness," LSE Research Online Documents on Economics 121783, London School of Economics and Political Science, LSE Library.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jirjahn, Uwe & Rienzo, Cinzia, 2025. "Working from Home and Mental Health: Giving Employees a Choice Does Make a Difference," IZA Discussion Papers 18187, Institute of Labor Economics (IZA).
    2. Mehrzad B. Baktash, 2024. "Does Performance Pay Increase the Risk of Worker Loneliness?," Research Papers in Economics 2024-12, University of Trier, Department of Economics.
    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. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2023. "Does Performance Pay Increase the Risk of Marital Instability?," GLO Discussion Paper Series 1305, Global Labor Organization (GLO).
    5. 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.
    6. Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2025. "Variable pay and work hours: does performance pay reduce the gender time gap?," Economica, London School of Economics and Political Science, vol. 92(368), pages 1149-1167, October.
    7. Green, Colin P. & Heywood, John S., 2023. "Performance pay, work hours and employee health in the UK," Labour Economics, Elsevier, vol. 84(C).
    8. Benjamin Artz & Colin P. Green & John S. Heywood, 2021. "Does performance pay increase alcohol and drug use?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 969-1002, July.
    9. Cornelissen, Thomas & Heywood, John S. & Jirjahn, Uwe, 2011. "Performance pay, risk attitudes and job satisfaction," Labour Economics, Elsevier, vol. 18(2), pages 229-239, April.
    10. Baktash, Mehrzad B., 2023. "Overeducation, Performance Pay and Wages: Evidence from Germany," GLO Discussion Paper Series 1327, Global Labor Organization (GLO).
    11. Artz, Benjamin & Heywood, John S., 2025. "Does Performance Pay Deter Job Quits?," IZA Discussion Papers 17791, Institute of Labor Economics (IZA).
    12. Clemens, Marco & Sauermann, Jan, 2025. "Making the right call: The heterogeneous effects of individual performance pay on productivity," Labour Economics, Elsevier, vol. 94(C).
    13. Green, Colin P. & Heywood, John S., 2022. "Does Performance Pay Influence Hours of Work?," IZA Discussion Papers 15474, Institute of Labor Economics (IZA).
    14. Konstantinos Pouliakas, 2010. "Pay Enough, Don't Pay Too Much or Don't Pay at All? The Impact of Bonus Intensity on Job Satisfaction," Kyklos, Wiley Blackwell, vol. 63(4), pages 597-626, November.
    15. Marco Clemens, 2024. "Bonuses, Profit-sharing and Job Satisfaction: the More, the Better?," IAAEU Discussion Papers 202406, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    16. Drakopoulos, Stavros A., 2023. "The Economics of Wellbeing and Psychology: An Historical and Methodological Viewpoint," MPRA Paper 117891, University Library of Munich, Germany.
    17. Benjamin Artz & John S Heywood, 2024. "Performance pay and work hours: US survey evidence," Oxford Economic Papers, Oxford University Press, vol. 76(3), pages 609-627.
    18. K. Pouliakas & I. Theodossiou, 2009. "Confronting Objections To Performance Pay: The Impact Of Individual And Gain‐Sharing Incentives On Job Satisfaction," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 662-684, November.
    19. K. Sommerfeld, 2013. "Higher and higher? Performance pay and wage inequality in Germany," Applied Economics, Taylor & Francis Journals, vol. 45(30), pages 4236-4247, October.
    20. Cristina Bernini & Alessandro Tampieri, 2023. "Much Ado about Salary: A Comparison of Monetary and Non-Monetary Components of Job Satisfaction," Working Papers - Economics wp2023_06.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:glodps:1677. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/glabode.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.