If the findings of a recent study are anything to go by, having an efficient co-worker might increase the chances of you earning better. The study, Peer Effects in the Workplace, published in American Economic Review, found that in low-skilled occupations, an increase of 10% in the average performance of the co-workers led to a rise of nearly 1% in wages.
What is the study?
Researchers from University of York, and University College of London studied the wage records from administrative social security data for millions of workers and their co-workers, over a period of 15-years, across 330 professions, in a sizeable metropolitan area in Germany. The authors of the study, Thomas Cornelissen, Christian Dustmann and Uta Schonberg, said that “We would expect that some positive practices would 'rub-off' on co-workers, and in fact we knew from previous research that such effects exist for specific occupations... We aim at providing more generalizable results by investigating a large local labor market, with a focus on peer effects in wages rather than productivity.”
What did they find?
- In low-skilled jobs, increasing colleagues’ performance by 10% translated to roughly 1% rise of a salary for an individual. The reason for this effect is the pressure to keep up with better co-workers.
- To establish whether the improvement in performance was due to learning from colleagues, or simply due to pressure to keep up with them, the researchers also studied what happened once a high-performer leaves the organisation.
- However, they found that once a high-performer leaves, the remaining workers ‘slip-back’ to their previous level, thereby suggesting that peer pressure was the prime reason for better productivity, and hence, wages.
- The same however, cannot be said for high-skilled occupations, like that of lawyers, doctors or architects. Possibly, work practices in such professions are not easy to observe, or everyone might not know what each other’s work objectives, or the skills needed for a special role.
- The study suggests that there is less social pressure in high-skilled professions, as opposed to low-skilled professions.
Why are the findings important?
Dr. Cornelissen explains, “Our results show that improvements in performance due to co-worker quality raise a workers’ wages, something that hadn't previously been analysed... The results of this work could be applied to a number of areas within company practices, such as working from home policies, the design of office spaces, and more training schemes. Working from home is generally considered a good thing, for example, but if co-workers are as important as we think, it might not be the best option for everyone.”
Bottom-Line
The study gives a new dimension to the on-going discourse that explores to engage employees to maximise their productivity. This dynamic of colleague peer pressure doesn’t come to the fore when discussing maximisation of productivity. However, as the study shows, motivation to do as good as a high-performer automatically uplifts the productivity, therefore, the wages of an individual – even when they might not be consciously aiming for either. Furthermore, the fact that an average employee is likely to ‘slip-back’ to their previous level when a high-performer exits the organisation, suggests that the culture of inculcating high-performers can reap the desired objective of encouraging better performance throughout the organisation. With several organisations designing policies to introduce high-performance workers and cultures, the future holds an exciting proposition in this domain.