Expectations, Wage Hikes, and Worker Voice: Evidence from a Field Experiment

2016-06-20

2016-07-15

Worker retention, worker attendance

Just before the 2016 minimum wage schedule was announced by the Karnataka State Government, we collected data on a random sample of workers regarding their current wages; expectations about changes due to the upcoming wage increment; and other opportunities available to them in the labor market. These data reveal that workers' expectations were substantially higher than the realized wage hike: workers expected a hike that was roughly three times the size of the realized increase. On average, workers expected to earn about 17 USD (16 percent of total salary) more (per month) than their realized post-increment monthly wages.

Directly following the wage hike, we randomized half of the surveyed sample to an intervention designed to enhance workers' voice. Workers in the treatment group were invited to take part in a survey asking for 1) feedback on satisfaction related to job, supervisor, wage, and workplace environment; and 2) opinions on various statements: whether mistakes are held against them, whether it is difficult to ask others for help, whether supervisors encourage learning, and whether they can trust their supervisor to advocate for them, listen to them, and help solve their problems.

The use of an employee satisfaction survey to reduce quitting is motivated by the work of Hirschman (1970) and many others, under the basic premise that individuals have two main options in unsatisfactory situations: "exit" the relationship or use their "voice." That is, if unsatisfied with their jobs, employees can quit without trying to improve their situation at work (exit), or they can stay, speak up, and try to remedy the situation (voice). The workers in our study context do not typically have many opportunities to voice concerns about their working conditions and may therefore have no option but to exit, which may in part explain the firm's high rate of turnover. A "voice" instrument like the survey we administered has the potential to reduce exit, both because it serves as a means of expressing workers' dissatisfaction or concerns (directly providing utility to workers), and because it may lead to actual constructive changes in the work environment.

Randomization conducted by computer program.

Individual worker

No

2,000 workers (in 12 factory units, though treatment was not assigned by factory unit)

2,000 workers

1,000 treatment workers and 1,000 control workers

Enabling worker voice could improve worker retention and effort by providing workers the chance to improve their situation or an outlet to express discontent. We provide a test of this hypothesis via a randomised controlled trial in Indian garment factories. Just after what proved to be a disappointing wage hike, workers were chosen at random to participate in an anonymous survey in which they were asked for feedback on job conditions, supervisor performance and overall job satisfaction. Enabling voice in this manner reduced turnover and absenteeism after the hike, particularly for the most disappointed workers.

Adhvaryu, A., Molina, T., & Nyshadham, A. (2022). Expectations, Wage Hikes and Worker Voice. The Economic Journal, 132(645), 1978-1993.

https://doi.org/10.1093/ej/ueac001