Friday, February 13, 2015

Will workers "pay" to work for a good cause?

From a field study of Amazon Turk workers, Douglas Frank and Craig Smith find that about half of workers will accept a 12-18% wage discount to perform tasks that benefit a "socially responsible organization." 

These results suggests that "virtue" has its own reward, but the premium seems small.  

Of course, you should know that markets turn self interest into group interest, or that reward has its own virtue.  Read the book.  Or these posts.  Or this one.  


  1. Overall, there is more to a person’s job then just money. As discussed in the text, once equilibrium is reached, differences in wages, called compensating wage differentials, reflect the differences in the inherent attractiveness of various professions. Why do embalmers make 30% more than rehabilitation counselors? Assuming the two industries are in the long-run equilibrium, the higher wages compensate embalmers for working in a relatively unattractive profession. (Luke, McCann, Shor, & Ward; 2014). The first thing I feel a person must find is some sought of enjoyment in their job. My belief is as good as the compensation can be for the position, the daily grind will catch up to an individual and they will never truly be able to fully live up to their potential. I’m not saying everyday should be a party at work, however, without sell fulfillment, enjoyment, or the helping of others, work can be less gratifying. Economically, let break it down: An individual makes $80,000, but decides to make 12% for a job they feel is much more gratifying at $70,400. That’s a difference of $9,600 in salary. Now of that $9,600, let’s say 40% of it goes to taxes etc…. you now walk away with $5760. $5760 over 52 weeks is $110. So now the really decision comes to play, for an extra $110 a week are you willing to do something you may not like and have no gratification in doing, or would you rather do something that you love and feel like you make a difference at the end of the day?
    Luke, F., McCann, B, Shor, M., & Ward, M. (2014). Managerial Economics; A Problem Solving Approach (3rd ed., p. 106). Mason: South-Western Cengage Learning

  2. This as an interesting viewpoint; Amazon used crowdsourcing from the on-line community to perform tasks that computers are unable to do. “Virtue” may have its own rewards or maybe better stated “virtual employment” has its own rewards. Regardless, the very existence of economic profits attracts entry into a market. In this case, crowdsourcing is a type of participative online activity in which an individual, an institution, a non-profit organization, or company proposes to a group of individuals of varying knowledge, heterogeneity, and number, via a flexible open call, the voluntary undertaking of a task. Amazon appears to be using the indifference principal which states “if an asset is mobile, then in long-run equilibrium, the asset will be indifferent about where it is used; that is, it will make the same profit no matter where it goes.” Economic profits in a system of perfectly competitive markets will, in the long run, be driven to zero in all industries and if Amazon is going to continue to be a leader in eCommerce and make better than average profits, crowdsourcing is one way to create a competitive advantage. I believe that social responsibility is an organization's obligation to maximize its positive impact on stakeholders, and still create wealth for shareholders.

    In equilibrium, differences in the rate of return reflect differences in the riskiness of an investment and compensating wage differentials reflect differences in the inherent attractiveness of various professions (Luke, McCann, Shor, & Ward; 2014). What economists call “opportunity costs”!

    Luke, F., McCann, B, Shor, M., & Ward, M. (2014). Managerial Economics; A Problem Solving Approach (3rd ed., p. 106). Mason: South-Western Cengage Learning

  3. Having worked in the nonprofit sector for the majority of my career, I have to say that agree with this post completely. Nonprofit organizations are generally considered to pay employees much less than they would earn in the for profit sector. Nonprofit organizations also rely heavily on volunteers who receive no pay at all. It is reasonable to assume that employees and volunteers work for these organizations, despite the low or nonexistent pay, because they believe in the mission of the organization. I’ve studied Social Exchange Theory and its application to nonprofit volunteers. The general consensus is that utility someone gets from what is called the “warm glow” of doing something good is part of what they get from the organization. For some people, the “warm glow” can be very valuable. This means that they would likely accept much less pay than someone who does not place value on the intangible benefits of their work.

  4. Everyone “pays” to work. There is some tradeoff for everything that we do, the opportunity cost, perhaps this is difficult to see when we are making “enough” money or like the job we have so we have no incentive to look for a different one. There are examples all the time of people not taking a pay increase because the company is not doing well, and collectively they want to be supportive – one year of no raises will set the company up for long term success. One year of flat wages is a lifetime of lower living standards. When an employee does not have an increase in pay their purchasing power is lowered because of the increase in cost of living. I am sure we understand that as the prices at the grocery are steadily rising, or the latest play by manufactures, to charge the same for smaller packages, we will not be able to buy the same amounts year over year. Even those that have excess money – savings, or some amounts of disposable / discretionary income will have some effect in the future. This may result in a decrease in savings, this may be realized when we need to work an extra year before retirement to meet our financial goals.

    1. There is much more to life than money. With that being said, we still have to pay bills, tuition, mortgages, etc. So the trade off to be happier at a job then to make for money may seem like a factor to improve one's mental health, yet the stress of not being able to pay for bills and other things that may be needed, may be a more severe trade-off.
      I had worked for a not for profit agency in the past. I did love what I was doing, but financially there was not enough room for growth to enable me to start a family. I had to move on and I found a well paying job that I also love.
      Some people get comfortable and do not want to take a risk, one that may benefit them finacially, as well as boost there morale.
      It is not a risk unless you take it.

  5. Social responsibility is not a new term and organizations that do things the “right way” have been more appealing to quality employees than organizations that do not care about its customers or employees. Over 2500 years ago, a Chinese government employee tried to invoke the Five Virtues into government as a role model of how an organization should conduct business. These were: Li is for ritual etiquette, manners, gravity; Ren is for Kindness to the fellow man; Xin is for truthfulness, faithfulness and sincerity; Yi is for righteousness or honesty, generosity of soul; and Xiao is for filial piety, for strong family values (

    Fast forward to 2015 and with today’s college graduates, it is expressed not only in their personal satisfaction on how they should add value to the organization, but also how the organization must act socially responsible. Statistically, the Cone Millennial Cause group found that 80% of 13-25 year olds wanted to work for a company that cares about how it impacts and contributes to society. And, many people will forgo some monetary level of compensation for a job they find satisfying (Meister, 2012).

    This trade-off relates to the compensating differential which determines if the asset (labor pool) is indifferent between two job opportunities or if the asset (labor pool) is mobile and will switch to the higher-paying position (Luke, McCann, Shor & Ward, 2014, p. 106). With the new millennials, there appears to be a trade-off between maximum wages and a lowered wage scale that includes nonmonetary compensation (e.g. benefit) of working for a socially responsible company. While Frank and Smith’s research indicated a 12-18% lower wage would keep people, most companies might use 5-10% of the lower wages towards social responsibility and not discount wages as deeply. By doing so, the company can keep talent while meeting the employee’s desire to belong to a socially responsible company.

    That is a competitive advantage for companies that wish to benefit from this employee passion, because companies can leverage good actions with smart business practices that lower costs and improve the bottom line. This is possible if the organization develops a social mission, engages the employee, and seeks other new hires that embrace the organization’s social mission too (Khalili, 2010).

    All the same, companies that follow the 2500 year old approach , or today’ s version of social responsibility might find that the ancient government employee was correct when he said, “Choose a job you love, and you will never have to work a day in your life.” Thanks Confucius!

    Karen Whelpley

    Work Cited
    Khalili, O. (April 26, 2010). Why Your Company should have a Social Mission. Web. (March 17, 2015). Retrieved from:

    Luke, F., McCann, B.., Shor, M., & Ward, M. (2014). Managerial Economics: A Problem Solving Approach (3rd e., p. 106). Mason: South-Western Cengage Learning.

    Meister, J. (June 7, 2012). Corporate Social Responsibility: A Lever for Employee Attraction and Engagement. Web. (March 17, 2015). Retrieved from:

  6. It’s evident that there are those individuals that feel they have somewhat of a calling to help non-profit organizations, charities, etc. It provides them with a sense of well-being or happiness giving back to others or helping a cause that is dear to them. It’s certainly a trade-off and an opportunity cost of sorts, forgoing the chance to earn a steady salary, bonuses, paid vacation and sick leave for something less. Or is it? Maybe these people don’t see working in an office or keeping their heads in a book in hopes of getting higher education to then get a higher level job later down the road an option for themselves. People can argue that the individual is cheating themselves out of a life, but that can go both ways.

    Regardless, majority of society does pay to work in one way or another. Whether it’s the gas you put in your car to drive almost an hour to the office, or putting in the extra hours on a project that could have been spent with your family. Those that “pay” to work for a charity don’t see it as such. “For many employees of nonprofits, the reward for a job well done is not just the direct compensation, but also the happiness derived from fulfilling the unique mission of that organization and serving the community” (“Working for a Good Cause has its Benefits”).

    Ueda, D. “Working for a Good Cause has its Benefits”. Retrieved from:

  7. Markets turn self interest into group interest because even though workers are willing to make less money to perform tasks that benefit our society, work for a non-profit, or even volunteer, there is still money to be made, money to be saved, or opportunities for expansion on those ideas. And where there is profit and opportunity, more people will become interested. We all act on our own self interests daily and the more we act on those self interests the bigger they become as others join in.

    In addition, for many, those self-interests include being selfless. There are intrinsic rewards for being selfless. The satisfaction of knowing that you helped another human being, animal, or society can outweigh some extrinsic rewards. Also, one may reap the future benefits of a sacrifice made now if that sacrifice contributes to a better future for their community. This could also include other sacrifices such as recycling, watching water usage, green energy, etc. All examples of ways one can give back and another can make money ex: recycling centers, manufacturers of solar energy panels and devices etc.

  8. In my view we should always be ready to pay for good cause, it’s something everyone’s responsibility. I do Forex trading and whatever profits I make, I just share it 2% with other people (needy) or do work for poor, so that’s what I feel everyone should do and I am also thankful to my broker OctaFX, it never charges extra, so with that saving, I can use it for these purpose and it’s really nice to be helping poor people.

  9. Working for a good cause can have a much more positive impact on someones life than money. From personal experience, I know how it feels to work as hard as you can in a position that you truly believed in, only to be completely undervalued and under appreciated. Why did I stay at that job? It was a fear of losing a regular income and health benefits. Instead of taking a risk and giving up the money, I dealt with more personal, emotional issues working at this job that gave me no sense of fulfillment or gratification.
    Employers and organizations should take these thoughts into consideration. Employees are likely to be more effective and productive in a more positive work environment. Incorporating efforts to help the good of others can put a positive turn on the work environment. It is truly amazing how a selfless act can transform a person.

  10. Some nonprofit organizations are supporting a great cause; however, because the company is nonprofit, salaries are usually pretty low. I currently work for a nonprofit organization offering services for autistic children and adults. Many of the parents whose children are participants at the school/group home are so grateful for an organization like ours. The participants are truly striving, and making progress. Some refer to our services as a miracle. While it is amazing to service such a community, it is hard to get your life and family started with the salary that is offered. Working for a good cause is costing me. I an unhappy, and no feeling of gratification and fulfillment. Switching jobs will eliminate those feelings.