In a study examining the relationship between pay raises, expectations, and performance, University of California, Berkeley's Haas School of Business Assistant Professor Alexandre Mas found that police performance declined sharply when officers lost in arbitration over their wages.
Mas studied 383 final offer arbitration cases involving compensation disputes between New Jersey police unions between 1978 and 1996. The cases provided a unique opportunity to test how expectations about pay and actual pay affect productivity. In final offer arbitration, the two sides submit offers to an arbitrator and the arbitrator is allowed to choose only one side's offer in a binding settlement, thus creating a wedge between the pay police received and the amount they demanded. Mas then matched the arbitration data to monthly measures of police performance by jurisdiction.
Mas found that per capita number of arrests were 12 percent higher in the months following arbitration when arbitrators ruled in favor of police officers compared with when they ruled against them. His findings are outlined in an article titled "Pay, Reference Points, and Police Performance" in the latest issue (August 2006) of the Quarterly Journal of Economics.
"Losing arbitration affects productivity, even when the stakes are small," says Mas, a member of the Haas School's Economic Analysis and Policy Group. "For employers in any organization, the results imply that it's really important to manage worker expectations when considering wage policy."
Productivity dropped when the police lost at arbitration. But productivity rose when police won at arbitration.
Mas found that when arbitrators ruled in favor of the union, police forces on average made 5 more arrests per month per 100,000 capita after arbitration than before arbitration. But when unions lost in arbitration, he found police officers averaged 6.8 fewer arrests per month per 100,000 capita after arbitration compared with before arbitration.
Officers did not appear to alter enforcement in murder and rape cases, but did make fewer arrests for assault, robberies, and property crimes if they lost arbitration.
In addition, Mas found that the magnitude of a union's arbitration loss was strongly correlated to how much the arrests declined.
I see a problem in all this: If the police productivity rose after a win for how long did the productivity stay higher? Ditto on the drop. After all, if the productivity stayes high eventually another wage negotation will happen. At that point my guess is the odds seem to be against yet another rise in productivity after yet another arbitration win. Maybe the productivity boost is short-lived until workers become accustomed to their higher salaries. Do disappointed workers stay demoralized longer on the job than happy workers stay more productive?
People respond to incentives. How to structure pay incentives for police to boost their productivity in a sustained way? Simply rewarding a higher arrest rate could backfire in the form of more arrests that aren't justified. Or police could put more time into easy arrests of criminals who commit less important forms of crime. Incentives could be structured to reward lower rates of crimes reported. But police then would become incentized to write up fewer crime reports than they hear about.
|Share |||By Randall Parker at 2007 January 20 09:16 PM Economics Motivation|