effort bargaining

A term first used by (‘The Effort Bargain’, Industrial and Labour Relations Review, 1957), popularized by W. Baldamus (Efficiency and Effort, 1961), in relation to the competing rationalities behind employment which emerged from studies of incentive payment systems. The latter assume that workers seek to maximize money income and thus share in the managerial definition of rational action. Field studies in industrial sociology and psychology revealed that workers typically restrict output (that is, produce less than the technically possible level for maximum short-run earnings), because they do not expect any dramatic change in their average earnings level. Synthesizing the results of such work, Baldamus argued that because workers do not expect long-run fluctuations in their overall income, it is rational for them to minimize the wage disparity between the amount of effort required by a particular task and the average rate of pay. Different social classes in fact will entertain conflicting values regarding the notion of a fair day's work for a fair day's pay. Incentive schemes may even encourage workers to conceal the level of actual effort from work-study engineers and management. Today it is recognized that effort bargaining has important implications for the conduct of labour relations , since wage-effort comparisons between groups was endemic to collective bargaining itself, as well as attempts by modern governments to run incomes policies.