Bonuses Do Work--Just Not for Bankers

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The idea behind bonuses seems to be pretty straightforward: reward people and they will exceed expectations. In 2007, this translated into letting the financial big-wigs hang onto their extra benefits to keep them on board for the economic recovery. However, the Guardian’s Aditya Chakrabortty says this is absolute rubbish--his research shows that bonuses don’t make top earners work harder -- they work hard, or they don’t. The real return on bonuses he says, starts lower down on the economic ladder.

Bonuses can spur workers on to do basic mechanical tasks faster and better--clearing a field of fruit before it goes rotten, say, or scanning in multi-packs of Andrex in busy supermarkets. But on more complex tasks, any sum beyond a paltry one is counter-productive. The same results have been shown in other studies. When investment bankers argue that their work is so complex they need bonuses, they are contradicting the research. And of course, they are ignoring the history of the past few years, which shows that bonuses drove an entire industry to pull stupid gambles--with disastrous consequences. ... Besides, rewards in financial services are already so high that the City lures in bright young graduates like Camden market draws goths. On the fruit fields of Kent, however, the shortage of talent is real.

This article is from the archive of our partner The Wire.