This important finding was uncovered by scientists from the University of Innsbruck, Austria, as they analysed results from an economic experiment. The project, supported by the Austrian Science Fund (FWF), has attracted great interest in Austria, as it also seems relevant to the type of collective contract that is commonplace there.
When it comes to hiring new staff, employers can choose to offer standardised contracts – where equal responsibilities are remunerated on an equal basis – or to negotiate individual contracts. Dr. Martin Kocher, Dr. Wolfgang Luhan and Prof. Matthias Sutter from the Department of Public Finance at Leopold Franzens-University in Innsbruck can now offer some help to those faced with this tricky decision.
Their research has proved for the first time that employers draw clear benefits from standardised salaries because, if a market only issues incomplete contracts, employee responsibilities become difficult to pin down. In other words, standardisation does not simply increase salaries, it also generates economic advantages in the shape of better performance and greater market efficiency.
More pay, better performance
These research results are clearly reflected in the data collected, as Project Manager Prof. Sutter explains: "Our observations revealed that, compared to individual agreements, salaries related to standardised contracts are 30 percent higher. However, performance is also higher in these cases – by 29 percent. Faced with these results, it comes as no surprise that salary standardisation also increases market efficiency by almost a quarter. Standardised contracts, the economic advantages of which have never before been investigated, are now becoming increasingly attractive thanks to these results."
The point behind these results seems simple. Employers who wish to financially reward individual employees in the long term must also increase the salaries of all other employees. The salary increase causes everyone to work harder and, as a result, leads to greater market efficiency. This cycle is generated due to the fact that incentives and socially responsible standards play a key role in a market where responsibilities are difficult to specify in contractual form.
These results were based on a laboratory experiment involving almost 200 students from various courses at the University of Innsbruck. A "gift exchange game" was used to simulate a market where employers could offer potential employees different contracts.
But practical examples are easy to find, especially in the service industry, as Prof. Sutter explains: "Particularly in the university system, employees who essentially have the same job description are remunerated on very different scales. This is due to the rapidly changing employment conditions in the public service sector. As a result, lecturers and professors get different contracts with different salary and pension rights. Our data now suggests that this could have a negative impact on performance."
At first sight, the research results would appear to be relevant to the collective contracts that are a traditional part of the Austrian labour market. However, these contracts do not involve employers standardising salaries, but rather trade unions entering into salary negotiations that affect whole occupational groups. As the scope of the laboratory experiment was limited, questions as to its relevance in this area must remain unanswered for the time being. Nevertheless, results from the FWF-supported project have shown that salary standardisation can bring unexpected economic benefits – perhaps even if these are the result of trade union processes.
Till C. Jelitto | alfa
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
3-D shape acquisition using water displacement as the shape sensor for the reconstruction of complex objects
A global team of computer scientists and engineers have developed an innovative technique that more completely reconstructs challenging 3D objects. An ancient...
Physicists have developed a new technique that uses electrical voltages to control the electron spin on a chip. The newly-developed method provides protection from spin decay, meaning that the contained information can be maintained and transmitted over comparatively large distances, as has been demonstrated by a team from the University of Basel’s Department of Physics and the Swiss Nanoscience Institute. The results have been published in Physical Review X.
For several years, researchers have been trying to use the spin of an electron to store and transmit information. The spin of each electron is always coupled...
What is the mass of a proton? Scientists from Germany and Japan successfully did an important step towards the most exact knowledge of this fundamental constant. By means of precision measurements on a single proton, they could improve the precision by a factor of three and also correct the existing value.
To determine the mass of a single proton still more accurate – a group of physicists led by Klaus Blaum and Sven Sturm of the Max Planck Institute for Nuclear...
The research team of Prof. Dr. Oliver Einsle at the University of Freiburg's Institute of Biochemistry has long been exploring the functioning of nitrogenase....
A one trillion tonne iceberg - one of the biggest ever recorded -- has calved away from the Larsen C Ice Shelf in Antarctica, after a rift in the ice,...
21.07.2017 | Event News
19.07.2017 | Event News
12.07.2017 | Event News
24.07.2017 | Power and Electrical Engineering
24.07.2017 | Materials Sciences
24.07.2017 | Materials Sciences