Empathy wages?: Gratitude and gift exchange in employment relationships

Economists have argued that employers sometimes pay above-market premiums (efficiency wages) in order to attract, motivate, and/or retain valued personnel. Drawing on recent work examining reciprocity and gift exchange, this paper proposes the notion of "empathy wages," in which the effect of the premium paid depends on the extent to which it elicits gratitude from recipients. We argue that a particular gift (monetary or otherwise) offered by an employer is likely to elicit more gratitude among "non-stars": workers who are relatively disadvantaged and in the lower part of the performance distribution. In contrast to "stars," "non-stars" are likely to compare the treatment they receive to the inferior opportunities or treatment they (might) have received outside of their present employment situation. Star workers, in contrast, are likely to believe that they are worth whatever they can command. The economic viability of such "empathy wages" thus depends on how much star versus non-star workers vary in gratitude, relative to how they differ in output and compensation. We explore a variety of data bearing on how much stars differ from non-stars in their respective output and earnings (in star contexts such as professional sports and real estate sales). We then review or reanalyze some prior studies on gift exchange, documenting that those who are relatively disadvantaged and/or low performers do appear more grateful (or inclined to reciprocate gifts) than stars. Indeed, the magnitude of the difference is sufficiently large that it could offset quite marked differences in productivity or quite small differences in compensation (both of which would make stars relatively more attractive to employers). We suggest some conditions under which gratitude-based employment systems are more likely to flourish in real-world settings, as well as some fruitful lines for future research on these topics. (C) 2013 Elsevier Ltd. All rights reserved.