by John List, on corporate social responsibility.
My initial inclination is: firm does a good thing; worker reciprocates to firm by working harder; and the world is a better place. Everyone’s better off. But what this suggests is that there’s something deeper on the psychological side, that it’s not just triggering this reciprocity from workers. C.S.R. is also triggering something deeper, which the researchers in this area call moral licensing.
Pointer from Tyler Cowen. Read the whole transcript, to see the research method. He actually starts firms and hires workers in order to do controlled experiments.
That’s awesome. To actually run experiments.
As for what you call a CSR firm that motivates the employees through their moral compass? A church.
Or maybe we assume firms are merely economic actors with have certain moral and legal guidelines. They mostly do very good things but at times they have to act in a fashion that might not be good for society in the short run.
1) So GM was correct ‘What was good for GM was good for America’ in 1953 but made some choices over the decades against society. For example the lack of devising a decent small car is one of them.
2) In terms of workers, successful firms are able to get worker reciprocates beyond just economic means. Call it a form of tribalism (For example Google can hire the best programmers with the promise of advancement and company culture.) However, workers should realizes it is 90% an economic decision and that is the focus of the relationship.
3) There should be a concern that if all socio-economic actors believe everything is an economic decision than how do you control non-economic decisions. But that signal has disappeared the last 50 years. This was the place of the church traditionally but they are losing influence as they are not an economic decision. Say 100 years a worker could signal their value to society based on church attendance. But that signal has disappeared the last 50 years. (And all societies have had signals for young people to achieve to convince the elite, political or economic, to trust.) So who society teaches values to kids? In most areas it is school teachers not churches. (I do think social conservative exaggerate what teacher give student to be honest.) And note private schools have lost students to public schools the last 15 years.
People are always trying to signal status, impress each other, and show off. One of the big ways we do that these days is with our answer to “Where do you work and what do you do?”
Well, many jobs wouldn’t seem very impressive without a little, ahem, salesmanship. Maybe someone tells you that he is a “Vice President” at the brokerage, which sounds pretty high up, until you realize that everyone is a “Vice President” there, but there are Senior VPs, Executive VPs, etc. (true story!)
Part of what makes a job desirable is the ability to use it to communicate to others how worthy you are, and that includes moral worthiness and aspects of character and commitment to socially desirable causes and outcomes. If you described working in a soup kitchen without the charitable aspect, “I ladel out soup,” it sounds low status, but if add the charitable purpose back in, it allows you to show you care and to advertise yourself as a good person. That’s why many people are attracted to NGOs and non-profits for employment, to benefit from the same shine.
In these experiments, if the results are to be believed, then what I suspect is going on is that the ability to sincerely tell people “I help underprivileged kids … ” is a form of psychological and social compensation worth the wage gap. I suspect that the highest status, most famous, and “coolest” companies, when recruiting for positions not involving intense competition for top talent, are able to hire at a discount. Teachers and military are two other examples of careers that get a good deal of public respect, and so which are probably able to leverage that respect as a exogenous part of the intangible benefits package and pay less than if that weren’t the case.
But at big corporations, this reasoning doesn’t hold. No one knows or cares about way goes in the CSR report, and individuals can’t use the content to make themselves look good in a natural way. “I work for Safeway in logistics management. Last year the company handed out some scholarships or something, put out a whole report about it and everything, so, in a way, doing good stuff like that is the kind of person I am.” Not how it works.
So, CSR activities probably don’t have much to do with wages at most firms where they are clearly orthogonal to and remote from the business’ core activities. Instead, it’s just the cynical exercise in public relations, creating dependent constituencies, and paying off potential trouble makers that everyone thinks it is.
By the way, the marginal rate of taxation on the value of social status compensation is likely negative, and it’s worth thinking about the broader implications of this fact.
@Handle. Very well said. After reading this, I can’t stop thinking in terms of getting paid in “social currency”. Which, as you say, has a zero or negative tax.
If I might extend your analysis, we seem to create a specific set of pathologies when the government employs workers in high social currency jobs like public school teachers, firefighters, etc. These workers seem able to extract a lot of concessions and adopt attitudes that wouldn’t be tolerated in either low social currency or non-government jobs.
Inside big companies, the CSR is often used as a cheaper form of Team Building, so the group goes out one day to paint a school, or fix furniture at day care center, or clean up a senior citizen meeting area.
The workers feel like they’re doing good, and being better people, and that the company cares about the targeted aid receivers. Maybe mostly driven by women, but guys join in too, for good feelings and/or to impress the cute girls.
Team building has lots of value to most companies with groups of folk in teams. So valuable that they spend lots of money on various events. This is a pretty low cost event, plus with lots of other PR signaling.
The moral license was very interesting, but I’m not sure how real it is as part of big company worker differentiation, with respect to CSR.
Just watched The Accountant on the tube and, yeah, talk about all kinds of moral licensing. I wonder what Larry Ribstein would have made of it.