A new study has found that the presence of high-performing co-workers can improve an individual’s performance, which boosts earnings.
Researchers from the University of York and the Centre for Research and Analysis of Migration at University College London (UCL), found that in low-skilled occupations, an increase of 10 percent in the average performance of co-workers raises a worker’s wage by almost one percent.
This is most likely driven by increased productivity because of pressure to keep up with better co-workers, the researchers said.
For the study, researchers looked at the wage records from administrative social security data for millions of workers and all of their co-workers over a period of 15 years across 330 professions in a large metropolitan area of Germany.
“We would expect that some positive practices would ‘rub-off’ on co-workers, and in fact we knew from previous research that such effects exist for specific occupations,” said Dr. Thomas Cornelissen, a researcher in the Department of Economics at the University of York.
“For example, a U.S. study showed that supermarket cashiers scanned shopping items faster when they worked the same shifts as fast-working employees. Our research showed that this effect was not unique to shop workers, but is applicable across many low-skilled jobs, such as waiters, warehouse workers, and agricultural assistants.
‘Moreover, our results show that improvements in performance due to co-worker quality raise a worker’s wages, something that hadn’t previously been analyzed.”
It was not clearly understood whether improvements in performance were due to learning from colleagues or whether it was more to do with the pressure to keep up, the researchers noted. To get a better sense of this, they looked at what happened after a high-performing co-worker left the company.
If learning from colleagues was the explanation for the positive performance effects, it was expected that remaining workers would keep up their performance after a high-performing co-worker left the company, the researchers speculated.
However, the data suggested that the opposite was true. Researchers found that the remaining workers tended to slip backwards after a good worker left, suggesting the productivity boost is more closely aligned with peer pressure, which lessens when good workers leave, potentially causing productivity and wages to stagnate.
The same rule did not apply, however, to high skilled occupations such as lawyers, doctors, and architects, according to the researchers. A reason for this could be that it is not as easy to observe the working practices of other colleagues in high-skilled professions, the researchers hypothesized. This means workers might not always know what everyone is doing or what it takes to achieve the objectives of that particular role.
The findings suggest there is less social pressure in high-skilled occupations compared to low-skilled, the researchers said.
“There are many challenges to conducting this type of work, such as the structure of the company, how to accurately establish cause and effect between co-workers, and finding a measure of good and poor performance,” Cornelissen added. “The more work we can do analyzing data from across the labor market, the more likely we will start to see common trends.”
He noted the study’s findings could be applied to a number of areas within companies, such as working from home policies, the design of office spaces, and training.
“Working from home is generally considered a good thing, for example, but if co-workers are as important as we think, it might not be the best option for everyone,” he said.
The study was published in the journal American Economic Review.
Source: University of York