Do responsible employers attract responsible employees?

The cost of a firm’s commitment to CSR may be offset by its appeal to motivated employees who work harder for lower wages

University of Oslo, Norway, and IZA, Germany

one-pager full article

Elevator pitch

Survey and register data indicate that many employees prefer a socially responsible employer and will accept a lower wage to achieve this. Laboratory experiments support the hypothesis that socially responsible groups are more productive than others, partly because they attract cooperative types, partly because initial cooperation is reinforced by group dynamics. Overall, the findings indicate corporate social responsibility may have cost advantages for firms.

Average contributions to one's group,
                        by group type (% of individual endowments by period)

Key findings

Pros

Firms with a reputation as socially responsible pay lower wages than other firms.

Such low wages are unattractive to unmotivated workers who care only about their own earnings.

A low wage may be tolerated by a motivated individual who prefers a socially responsible employer.

Laboratory experiments indicate that a socially responsible firm attracts more cooperative individuals.

Experiments also indicate that individuals cooperate more in a group the more that others in the group also cooperate.

Cons

Men’s wages are lower in socially responsible firms, but for women, results are less clear.

The cost advantages of social responsibility to firms do not necessarily make them more profitable.

Author's main message

There is empirical support for the idea that socially responsible employers can pay lower wages and yet attract more motivated, cooperative employees. This cooperativeness can be reinforced by group dynamics, allowing firms that adopt corporate social responsibility (CSR) to benefit from a more productive firm culture. Thus, such firms may be able to survive market competition, even if CSR in itself is costly. Empirical research on the topic is in its infancy, however, so findings must be interpreted with care.

Full citation

Full citation

Data source(s)

Data type(s)

Method(s)

Countries

How can we improve IZA World of Labor? Click here to take our 5-minute survey and enter a prize draw.