The Costs of Insecurity: Pay Volatility and Health Outcomes

Every day, millions of individuals rely on fluctuating financial rewards in the form of customer tips, commissions, piece-rate, and performance-based pay. While these compensation systems are increasingly common, the volatility in pay that they create may harm employee health. Based on conservation...

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Bibliographic Details
Published in:Journal of applied psychology 2023-07, Vol.108 (7), p.1223-1243
Main Author: Sayre, Gordon M.
Format: Article
Language:English
Subjects:
Commerce
Compensation
Conservation
Cost control
Ecological Momentary Assessment
Female
Finance
Health Outcomes
Health problems
Health status
Human
Humanities and Social Sciences
Humans
Indirect effects
Insecurity
Insomnia
Longitudinal Studies
Male
Marketing
Mindfulness
Money
Occupational Health
Outcome Assessment, Health Care
Physical Disorders
Physical Health
Physical symptoms
Psychological aspects
Psychology
Rumination
Sales
Scarcity
Sleep
Threats
Workers
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Summary:Every day, millions of individuals rely on fluctuating financial rewards in the form of customer tips, commissions, piece-rate, and performance-based pay. While these compensation systems are increasingly common, the volatility in pay that they create may harm employee health. Based on conservation of resource theory assumptions that money is a valued resource, I propose that volatility in pay represents resource insecurity, with costs to health. Across an experience sampling study of tipped workers (Study 1) and longitudinal studies of gig workers (Study 2) and those in sales, marketing, and finance (Study 3), findings demonstrate the harmful effects of pay volatility. Specifically, pay volatility had direct or indirect effects on physical symptoms, insomnia, sleep quality, and sleep quantity. Volatile pay was found to induce a scarcity mindset, where individuals ruminate and direct cognitive resources toward remedying the source of scarcity, with worse health outcomes as a result. Neither mindfulness nor savings rate moderated the effect. Exploratory analyses in Studies 2 and 3 revealed that one's dependence on volatile pay acted as a moderator that strengthened effects. Overall, performance-based pay creates pay volatility, which is linked to psychological threat and poor physical health for employees in a broad range of industries.
ISSN:0021-9010
1939-1854
DOI:10.1037/apl0001062