Economics as a from of Mind Control

The Fruits of Their Labors

http://www.slate.com/id/2197735/?from=rss

An amazing economics experiment and how it got field workers to pick a lot more strawberries.

For many business owners, getting the most out of staff is a perennial problem. In the case of fruit farmers, perhaps perennial is the wrong word: Workers show up for the summer harvest only. In a couple of weeks, the pickers here in Great Britain will be heading home, usually to a university somewhere in Eastern Europe.

Tough work for the fruit-pickers, the business is also a headache for the owner, who must offer a pay scheme that both satisfies minimum-wage laws and motivates workers in an industry in which slacking is an understandable temptation. The owner of a large British fruit-farm business, "Farmer Smith," was pondering the problem one Christmas when he discovered that the connection between pay and performance was also an area where economists were scratching around for solid evidence.

And so an unlikely alliance was formed between Farmer Smith and economists Oriana Bandiera, Iwan Barankay, and Imran Rasul. The economists would design and administer pay schemes, and in exchange for that (and for confidentiality), Farmer Smith would let them treat his business as a gigantic laboratory for researching the nexus between pay, workplace friendships (which they mapped out), and workers' productivity.

The owner had been paying a piece rate—a rate per kilogram of fruit—but also needed to ensure that whether pickers spent the day on a bountiful field or a sparse one, their wages didn't fall below the legal hourly minimum. Farmer Smith tried to adjust the piece rate each day so that it was always adequate but never generous: The more the work force picked, the lower the piece rate. But his workers were outwitting him by keeping an eye on each other, making sure nobody picked too quickly, and thus collectively slowing down and cranking up the piece rate.

Bandiera and her colleagues proposed a different way of adjusting the piece rate: Managers would test-pick the field to see how difficult it was and set the rate accordingly, thus preventing the workers from engaging in a collective go-slow. (If the managers made a mistake in their estimate, and the pickers didn't earn minimum wage, Farmer Smith would make up the shortfall with an extra payment. This rarely happened.) The economists measured the result. By the time the experiment was over, Farmer Smith's initial skepticism had long evaporated: The new pay scheme increased productivity (kilograms of fruit per worker per hour) by about 50 percent.

The next summer, the researchers turned their attention to incentives for low-level managers, who would also be temporary immigrant workers but who would be responsible for on-the-spot decisions such as which workers were assigned to which row. The researchers found that managers tended to do their friends favors by assigning them the easiest rows. This made life comfortable for insiders but was unproductive since the most efficient assignment for fruit picking is for the best workers to get the best rows. The researchers responded by linking managers' pay to the daily harvest. The result was that managers started favoring the best workers rather than their own friends, and productivity rose by another 20 percent.

Small wonder that the economists were invited back for another summer. They proposed a "tournament" scheme in which workers were allowed to sort themselves into teams. Initially, friends tended to group themselves together, but as the economists began to publish league tables and then hand out prizes to the most productive teams, that changed. Again, workers prioritized money over social ties, abandoning groups of friends to ally themselves with the most productive co-workers who would accept them. In practice, that meant that the fastest workers clustered together, and again, productivity soared—by yet another 20 percent.

The series of experiments provided a fascinating confirmation that financial incentives can trump social networks, with some precision and much detail about the mechanisms involved. Bandiera and her colleagues have now stopped the experiments, in the belief that there is nothing more to be gained from this particular seam of inquiry. The owner does not seem to agree: He's hired a consultant to keep on hatching new performance pay schemes.

Tim Harford is a columnist for the Financial Times. He is the author of The Undercover Economist, and his latest book is The Logic of Life.

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