Economics/Free Market


Are there other ways to give people incentives that do not involve money, or what money can buy? It seems these days some jobs pay extremely well, but most pay people as if they were worthless scum. And when it comes to jobs that require a college degree colleges argue that their programs are "cheap" compared to the amount one can expect to make when/if they get the corresponding jobs (but even that rarely pans out). There must be some other way to encourage people to choose one job/field or another that isn't directly related to pay, 401K, health insurance, tax incentives, etc?

The subject you're referring to is called motivational theory, which is a specific topic of behavioral economics (an overlap between psychology and economics) that deals with the role of incentives in determining a person's volume and type of labor output.

There are a number of theories on the nature of motivation, but there are two things that remain consistent across all of them.
1) Base needs must be met first.  These include things such as compensation sufficient for survival, a safe working environment, job security, and non-abuse professional relationship with coworkers and supervisors.  Herzberg called these base needs "hygiene factors", which he described as those minimum requirements that must be met for a person to accept or keep a job, but which will not drive them to succeed.  Maslow split these needs into physiological needs, safety needs, and some belonging needs.  In contrast, expanding on work by Mayo, the motivation to excel professionally comes from an alignment of incentives between employees and employer.  This includes such things as promotions, responsibility, public recognition, authorization to pursue personal projects for company benefit, and other things that allow a person to enhance their own presence within the organization.  This theory began with Mayo, who believed motivation was created by giving employees individualized attention and by greatly incorporating an individual into the greater social network within the organization in order to increase interpersonal obligations and concern between members of a company, rather than strictly professional acquaintances.  Later, Maslow included these sort of variables as belonging needs, esteem needs, and self-actualization needs.  Herzberg called these variables motivational factors.

2) The second thing that each motivational theory has in common is that each person will be motivated by different things.  While every person will be influenced by both hygiene factors and motivational factors (to borrow from Herzberg), there are a number of different factors of each type, and different people will value different ones.  For example, wages and insurance benefits would both be considered hygiene factors, but one person may value higher wages while another may value insurance benefits.  Organizational recognition (e.g.: employee of the month), and creativity opportunities are both considered motivational factors.  One employee may prefer to be given the esteem of their peers by being recognized for an award, while another employee may prefer the opportunity to pursue projects by which they are inspired to improve company operations and bring their ideas to life.  So, while there are different categories of variables in what motivates us to choose a field/company/job, the manner in which these different categories can be optimally applied to an employee will depend on the employee.  The best companies are the ones that tend to be aware of their employees needs, and have the flexibility to allow for varying degrees of each depending on what the employee is seeking.

Some companies that are well known for being good at applying motivational theory are Apple and Google.  Both companies offer a wide variety of basic services to their employees, free of charge, in order to ensure that all their needs are met.  At the same time, they both offer their employees the time and resources needed for them to pursue unique and creative projects that allow them to show-off their talents and gain recognition for their successes.

As for the costs and rewards of attending college, that also lies in motivational theory; not just in the promise of higher income, but also in a cultural belief that one must attend college to be a fully-respected person.  That idea, of course, ignores the other sources of education that are available - trade school, tech school, apprenticeships, internships, on-the-job training, etc.  So, what we end up with is an entire nation of people, all socially obligated to go to college rather than pursue other forms of education.  This extremely high demand raises the price of a college education.  At the same time, since there are so many people going through college programs, which are naturally limited in their program offerings and methods of teaching, there are far too many people all fighting for the same jobs.  For example, far too many people major in business administration, leading to decreased average wages and underutilization of people trained in this area, while electricians and plumbers are able to charge an extremely high price for their services despite the prevalence of poor workmanship very common in these skilled-trades since there simply isn't as much competition given the relative shortage of people trained in these fields.  Note also that work-sponsored training and education incentives are considered a motivational factor.

Real wages (wages adjusted for inflation) in the US have remained completely stagnant for nearly a century; only the top 2% of earners have seen any increase in real wages (which is in contrast to the common belief that it is the top 1%).  Companies simply will not incur the extra costs of hiring additional people or increasing wages unless they are forced to, which most commonly occurs when demand for their products increases to the point that they must hire more people to increase output in order to meet demand.  Employees are in a position where the total cost of employment must be less than the cost of capital necessary to replace them (e.g.: machines, computers, etc.).  During a recession, there is surplus labor through unemployment, so people accept lower wages in desperation as they fight for limited jobs.  During a boom economy, companies will invest in technology to increase organizational efficiency.  The entire time, the negotiating power of job-seekers is diminished, resulting in higher profitability for these companies, which translates into higher returns on investment (ROI) for the capital owners.  The method for dismantling labor unions by turning public support against them was popularized in the early 20th century as the Mohawk Valley Formula, which has since been refined and incorporated into public relations efforts to drive US national culture against efforts to improve one's own potential for success.  As technology continues to become cheaper and more productive, and the income inequality increases, we simply don't need everyone to work anymore to meet total market demand, which undermines the base of demand for products.  Low-medium income households tend to spend upward 99% of their total income (.99 marginal propensity to consume) which directly translates into corporate profitability through increased demand for their products, but companies have to guarantee that this money will be spend specifically on their products, so they have little incentive to provide incomes higher than market average to do what is necessary for overall economic growth.

Hopefully that answers your question.


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Michael Taillard


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Consulting with major corporations, government agencies, political organizations, small businesses, non-profits, start-ups, and even individual people. Teaching at universities around the world, and developing original coursework. Performing original research and analysis. Writing books and scientific studies.

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