Organizational Governance and Trade-Offs Between Pay and Subjective Employee Well-Being

Suppose you were offered a job or a promotion that gave you higher intrinsic rewards, but required accepting less pay than you could get elsewhere. Might you have concerns that the employer would, at some point, renege on its promise of higher intrinsic rewards—which are harder to observe than pay—leaving you with just lower pay? Even if the manager is being sincere at the time, later on there could be new pressures, perhaps because of profitability concerns, new executives, or a change in ownership. 

One thing that might shape your willingness to accept this deal is whether you think the organization’s reputation is important to it, such that it will live up to its promises in order to maintain a good reputation in the labor market. However, David Marsden, a longtime professor of employment relations at the London School of Economics, argued that a stronger signal of an organization’s likely commitment to implicit contracts is its governance structure, which is stable, easy to observe, and difficult to change, unlike perceptions about a desire to maintain some amorphous sense of reputation.

For example, in an investor-owned company with a strong shareholder value ethos, the managers are the agents of investor-owners and are tasked with acting on their behalf to generate financial returns. Because of financial concerns and the ability to buy and sell ownership and assets, employees should be wary of implicit contracts in which the promise of intrinsic rewards offsets lower pay because of managerial incentives and the prospect that new corporate owners or executives will ignore these non-transferable agreements. To the extent that family-owned firms may face weaker shareholder pressures while also embodying stronger social connections, visible ownership identities, and enduring inter-generational transfers of ownership, workers may be more willing to trust implicit contracts at family-owned corporations. 

In nonprofit and charitable organizations, conventional owners do not exist as there are not profits to distribute, but donors can be seen as key stakeholders to whom managers are accountable. Moreover, assets are largely non-tradeable and a social mission is explicitly part of the organization’s mandate. So discretionary actions allowed by this model of organizational governance are expected to serve the public good. In an earlier article, my colleague Avner Ben-Ner argued that “an organization’s nonprofit status may serve as a signal of trustworthiness to customers that their well-being will not be compromised by the organization’s pursuit of profit,” and the Marsden theorizing is that this applies to employees, too. Public sector organizations with socially-oriented missions, as in public education, health care, and social services, are theorized to be similar to nonprofit and charitable organizations such that the pursuit of the organization’s mission is likely to remain consistent with respecting commitments made to employees. But public sector agencies with more of a bureaucratic or regulatory function are more likely to have new governments change their orientation, similar to new owners or executives in a private-sector corporation.

Marsden’s theorizing, then, is that organizational features that are easy to observe contain information about the likelihood that the organization will fulfill its promises, and thus we should observe different combinations of extrinsic and intrinsic rewards across different types of organizations. In other words, employees will be less likely to expect breaches of implicit contracts promising higher levels of intrinsic rewards in lieu of pay when certain organizational features are present. Ryan Lamare and I explore this in a new article “Organizational Governance and Trade-Offs Between Pay and Subjective Employee Well-Being: A Comparative Analysis” which will appear in an issue of the British Journal of Industrial Relations honoring Professor Marsden. I’ve created a short animation that provides an overview of our article. 

In short, we find supportive evidence across 35 European countries. Moreover, the trade-offs across organizational types appear larger in liberal market economies, like the UK, where there is a stronger shareholder orientation and capital is impatient, compared to coordinated market economies, like Germany, where governance arrangements are somewhat more insulated and capital is more patient. At the same time, employee well-being across all organizational types appears greater in coordinated market economies, which isn’t surprising given the relatively greater strength of labor unions and other pro-worker institutions in that type of country.

Advocates for improving work often focus on work-related laws and institutions such as unions. But we shouldn’t overlook how organizational governance, such as a strong shareholder ethos, also affects human resources and worker well-being.

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Source: John W. Budd and J. Ryan Lamare (2025) "Organizational Governance and Trade-Offs Between Pay and Subjective Employee Well-Being: A Comparative Analysis," British Journal of Industrial Relations. https://doi.org/10.1111/bjir.12860. 

The article is open access, or you can watch our animated video overview.

Worker Voice and Political Participation in Civil Society: Lousy Work Is Bad for Democracy

The stories are familiar by now: businesses claim that there’s a labor shortage and others reply that they need to pay more. Pay is obviously an important part of a job, but we need to remember that the positive and negative aspects of work are complicated, which means that we must consider more than pay when evaluating job quality and worker well-being. Among many important things, this includes paying attention to how the quality of work affects society.  

Concerns with how workplace experiences affect the political arena are longstanding. Over 150 years ago, John Stuart Mill advocated for worker cooperatives and participatory economic systems because he believed economic democracy fostered political democracy. Most workers, however, do not work in cooperatives. But varying forms of worker voice can have elements of economic democracy, or more widely-speaking, at least some degree of autonomy. In a seminal book, Carole Pateman argued that individuals with autonomy in their work—e.g., the ability to control certain aspects of the job—develop confidence that they are capable of autonomous action. This confidence can spill over to the political and civic arenas leading to higher levels of participation in these arenas. In other words, workplace voice can create “psychological supports” for political and civic engagement. A second line of theorizing focuses instead on skill development. That is, exercising voice in the workplace can enhance skills pertaining to things like advocacy, negotiation, and communication, which can also be useful in the political and civic arenas. So workplace voice can lead to greater political and civic participation through skill enhancement.

Stronger forms of workplace democracy include being represented by a labor union or works council, and being involved with these forms of voice can also trigger both of these channels. That is, participating in a union or works council—and probably a worker center, too—can enhance confidence, instill beliefs about the importance of democratic decision-making, and develop skills that translate into greater political and civic engagement. 

If individual or collective voice prompts greater political and civic participation through these channels, it’s a happy byproduct of workplace voice rather than intentional one. But labor unions and other collective bodies can also intentionally try to increase political and civic participation through voter registration and get-out-the-vote drives, campaigns to contact politicians or join demonstrations, and training programs for political advocacy and running for political office. So unintentionally and intentionally, unions, works councils, and worker centers can build “democratic character: the willingness and capacity of individuals to engage in democratic politics and to do so in ways that are informed by judgements of the common good.” Conceptually, then, we should expect workers involved with these forms of collective voice to participate more readily in the political and civic arenas compared to workers that lack avenues of workplace voice.

But does this happen in practice? Ryan Lamare and I have recently reviewed the literature, and we conclude quite strongly that there are strong relationships between individual or collective voice on the one hand, and political and civic participation on the other. One of our favorite studies—because we authored it!—shows that across 27 European countries, workers with greater individual workplace voice are more likely to vote, contact politicians, work in a political party, and engage in other activities. This is just one of a number of studies on individual voice that have broadly similar findings across various samples and using diverse measures of individual voice and political participation. But spillovers are not guaranteed—supervisor support or suppression can also affect the workplace-political linkage. There is also a large literature on the effects of union voice. Empirical results show that union members are more likely to vote (in the US, Canada,  and Europe), engage in other political activities, and give to charity. There's also evidence that unions can also mobilize non-members to engage in protests. 

Admittedly, specifically identifying causal relationships can be challenging. For example, workers who are pre-disposed toward political and civic participation might look for jobs with individual and/or collective voice, so their observed participation was not caused by workplace voice. But the studies that are able to specifically address issues of causality typically find that non-causal explanations cannot fully explain the observed empirical relationships. In other words, it appears that individual and collective voice prompt some additional political and civic participation that would not have occurred in the absence of this workplace voice. In this way, having more individual and collective voice would be good for society.

Consequently, while individual and collective forms of worker voice are accurately viewed primarily as workplace phenomena, the interconnections to and ramifications for political and civic engagement should not be overlooked. Labor unions, with their own internal participatory, democratic systems and their incentives for political education and mobilization, are perhaps the form of worker voice in which it is easiest to expect there to be spillovers into the political and civic arena—including spillovers that are the byproduct of experiencing unionization and others that result from intentional union strategies. But even the experience of individual forms of workplace voice such as in-job autonomy can have spillovers by fostering democratizing attitudes and civic skills.

Across time and space, then, what happens at work is not expected to stay at work. Researchers and commentators often present this in a positive frame, as has been done here—that is, higher levels of workplace voice are associated with higher levels of political and civic participation. But it is important to remember that if this is true, then so is the corresponding negative framing—that is, dictatorial and authoritarian workplaces in which workers lack individual and/or collective voice likely lead to lower levels of political and civic participation, with consequent negative impacts on society. Pay might be the #1 concern of workers struggling to make ends meet, but societally we should be pushing not only for jobs that allow workers to support themselves and their families, but also that contribute to the broader health of our society.

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Source: John W. Budd and J. Ryan Lamare (2021) "Worker Voice and Political Participation in Civil Society," in Klaus F. Zimmermann, ed., Handbook of Labor, Human Resources and Population Economics (Cham: Springer). https://doi.org/10.1007/978-3-319-57365-6_213-1 [free access to the pre-publication version here].

The Unique CTUL-Target Partnership: Filling a Vacuum

Last week I had the pleasure of attending a roundtable event sponsored by the Workers Lab that focused on the CTUL-Target partnership. CTUL (Centro de Trabajadores Unidos en Lucha which translates to The Center of Workers United in Struggle) is a Minneapolis worker center that, to quote from its own mission statement, “organizes low-wage workers from across the Twin Cities to develop leadership and educate one another to build power and lead the struggle for fair wages, better working conditions, basic respect, and a voice in our workplaces.” Worker centers have emerged in many cities over the past decade to try to improve working conditions outside the parameters of traditional labor law and traditional labor unionism, particularly for workers who fall in gray areas of labor law. For example, the cleaning of retail stores is commonly contracted out to third-party contractors so it is difficult to establish a collective bargaining relationship with the retail chain because technically the janitors do not work for the retailer.

As the result of a fortuitous set of factors, CTUL and Target have formed a unique worker center-corporate partnership that is highlighted by the development and adoption of Target’s Responsible Contractor Policy. There are many aspects of this story worth telling, and CTUL’s website has a lot of information. At a high level, I think it’s a fascinating model. It’s not abdication to the vagaries of the market or one side or the other finding a way to dictate its agenda. It’s not a central authority trying to find one-size-fits-all solutions. Rather, it’s a way of creating dialogue among the parties most affected, finding common interests, and striking a balance on challenging issues for which they have conflicting goals. In other words, it’s a new institutional way to create what I’ve called “Employment with a Human Face” by balancing central employer and employee objectives (such as efficiency, equity, and voice).

As I listened to representatives of CTUL, Target, and TakeAction Minnesota describe their roles in this partnership, two things struck me. One, to have a successful partnership requires not just shifting power so that low-paid, immigrant and minority workers have some influence, but it also requires shifting mental models and mindsets. For this to be a productive partnership, Target had to shift from a defensive posture that saw CTUL’s criticism of abusive working conditions by Target’s janitorial services contractors as an attack, to an opportunity for listening, understanding, and ultimately, valuable community engagement. And CTUL had to be willing to adopt a partnership rather than conflictual mindset, too. As I’ve often written and taught about, ideas are important.

The other broad theme that struck me comes down to one word: vacuum. By contracting out its janitorial work, Target had essentially created a legal vacuum where it’s difficult for workers to effectively enforce their legal rights—the avoidance of wage theft, the presence of a safe workplace and workers’ compensation coverage, and the ability to unionize if desired. CTUL essentially filled this vacuum and shifted Target’s terrain of compliance. Because of the vacuum, Target didn’t have a traditional legal compliance concern and could ignore the janitor’s plight, but CTUL raised the specter of negative publicity for Target. So while lawsuits were perhaps not a concern (the traditional focus of corporate “compliance”), harms to the corporate brand became a concern. And Target responded. But this was prompted by a legal vacuum that in simpler times would have been filled by the enforcement of employment and labor law.

Another aspect to this vacuum was connected to remarks by TakeAction Minnesota, a community organizing coalition of progressive organizations. TakeAction Minnesota said that it had learned from CTUL that transformational shifts aren’t about a single issue win or just getting to the table, they are about shifting power, dealing directly with employers, getting a deal with enforcement mechanisms, and recognizing that there won’t be agreement on every single issue. Wait a minute, this is classic industrial relations thinking, and labor law promotes labor unions for exactly these reasons. But for whatever reason, unions are unable to be successful in certain sectors. A vacuum has been created, and it was striking to me that without even realizing the parallel, TakeAction Minnesota was highlighting exactly what unions used to do. In the areas of the economy with such vacuums, new organizations like CTUL and new partnerships like the one with Target are needed in order to create employment with a human face, and to create employment relationships that are WIN-WIN-WIN: relationships that serve workers and their families (win #1), organizations (win #2), and society (win #3).

Update: On October, 13, 2016, CTUL announced that 600 retail janitors who clean Target, Macy’s and Best Buy stores in the Twin Cities would begin collective bargaining with the janitorial contractors. CTUL's campaign led the contractors to agree to a trigger mechanism in which they would bargain a contract after 60% of the janitors in the area's 300 big box retail stores unionized, a threshold that has now been reached. This story has been covered by the StarTribune, The Guardian, and Workday Minnesota.  

Job Quality: An Industrial Relations Perspective

Last month I had the distinct pleasure of participating in the International Expert Conference on Job Quality hosted by Copenhagen Business School. This was a uniquely vibrant conference because it explicitly sought to bring together diverse perspectives on job quality. We need more of these interdisciplinary approaches to important issues relating to work. Unfortunately, job quality is so complex that it might not even be possible to agree on a definition. Indeed, what's a good job for someone might not be perceived as a good job by someone else. But much like debates over art, debates over job quality can be valuable for stimulating thinking, deepening awareness, etc., even if the question of what's good art, I mean what's a good job, is never fully resolved.

My contribution to the conference was to present an industrial relations view on job quality, with a particular emphasis on the pluralist industrial relations perspective. Within industrial relations, workers are seen as citizens entitled to standards of human dignity and self-determination, and labor markets are seen as failing to fulfill the textbook ideal of welfare optimization based on perfect competition. Workers' rights are therefore viewed as central to job quality, and non-market institutions are embraced as necessary for achieving high levels of job quality. Moreover, pluralist industrial relations thought models the employment relationship as consisting of a plurality of competing yet legitimate employer and employee interests, so good jobs are those in which these interests are balanced, typically with the help of non-market institutions.

Pluralist industrial relations thought seeks to understand how institutions and practices affect efficiency, equity, and voice while also trying to design institutions and practices to balance efficiency, equity, and voice. A pluralist industrial relations perspective on job quality, therefore, is one that analyzes job quality through a lens that focuses on the efficiency, equity, and voice aspects of jobs as importantly affected by institutions. Moreover, this reasoning within pluralist industrial relations thought indicates that high-quality jobs fulfill efficiency, equity, and voice, while low-quality jobs are those that lack one or more of these elements. And non-market institutions are needed to promote and protect high levels of job quality while improving jobs that are of low quality.

A pluralist industrial relations perspective therefore uniquely implies that efficiency should be a legitimate dimension of job quality. From a macro or social perspective, good jobs should add value. In other words, a job that provides many favorable benefits to workers and has robust levels of voice, but is a wasteful or unproductive job should not be seen as a good job from a macro perspective. This thinking is reinforced by considerations of meaningful work as part of job quality--namely, it seems reasonable to hypothesize that doing something productive and valuable (broadly-defined) at least adds to, if is not required, for deriving a robust sense of meaning from one's work.

But having a job, even a productive one, should not be enough. High quality jobs must also provide equity and voice to workers. Government policymaking can and should play an important role in establishing minimum standards and crafting other policies to redress bargaining power imbalances and promote the equity aspect of job quality. With respect to voice, the situation is slightly more complex because public policy cannot mandate voice. Some employees might prefer to remain silent or to defer to others; such decisions are legitimate uses of voice and are valid self-determined choices to the same extent as more active modes of participation in decision-making. The role of public policy, therefore, is to facilitate employee voice by protecting individuals who want to exercise various forms of voice and by outlawing actions that restrain employee voice. Unfortunately, U.S. public policies fall far short in promoting robust levels of equity and voice and we need to continue to explore how to create and promote high-quality jobs in a challenging economic and political environment.

A New Year's Wish List for Work

Happy New Year! As a new year starts, here is a wish list for work in 2012:

1. That the global unemployment rate declines so that the living standards of workers, their families, and their communities can improve.

2. That those who have too much work get less, and that those who don't have enough find more.

3. That we pay attention to job quality as well as employment rates when assessing the health of the labor market.

4. That the U.S. presidential candidates debate labor policies in an informed, reasoned manner.

5. That all workers who want a voice can exercise it, in whatever form desired.

6. That the attacks on public sector workers stop, and are replaced by a renewed, inclusive approach to labor-management problem solving that benefits workers and taxpayers alike.

7. That the American Crystal Sugar lockout be resolved.

8. That the Discovery Channel continues to air shows like Dirty Jobs, Swamp Loggers, and Flying Wild Alaska that show real workers doing important jobs with dignity, compassion, dedication, and good humor.

9. That at least some people read this blog, and maybe even my book on work, so that my work on work has some meaning!

What is Worker Well-Being?

The well-being of workers has long been an important issue. As industrialization became widespread in Britain, the United States, and elsewhere, early exposés by Friedrich Engels and Henry Mayhew, novels by Charles Dickens and Émile Zola, the photography of Lewis Hines, and diverse secular and religious reform movements focused attention on poverty wages and dangerous working conditions The academic field of industrial relations was born out of a deep unease with imbalances in the employment relationship that led to exploitative wages and working hours, arbitrary supervisory methods, and frequent industrial accidents. Concerns with worker well-being similarly underlie the early theorizing of Karl Marx, Georg Simmel, and others regarding the alienation of workers from their work, Max Weber's work on the repressive nature of bureaucracies, and Henri de Man's search for factors that enabled or prevented workers from fulfilling a variety of human needs such as activity, creation, and self-worth.

Fast forward to today, and many scholars, policymakers, advocates, and business leaders again embrace the importance of worker well-being. Once again, modern exposés such as Barbara Ehrenreich's Nickeled and Dimed illustrate the low pay, long working hours, and hazardous working conditions endured by some workers. But the scholarly work on worker well-being frequently adopts very different perspectives on how to define and measure worker well-being, and therefore comes to very different conclusions about whether well-being needs improving, and, if so, how to improve it. For some, worker well-being is a subjective concept based on workers' attitudinal evaluations of their work situations; for others, worker well-being is an objective issue evaluated against specific criteria. To make things even worse, studies from either approach frequently focus narrowly on specific aspects of well-being, such as physical health, psychological health, job characteristics, employee voice, pay and benefits, or economic insecurity.

David Spencer (University of Leeds) and I have just finished a paper ("Toward an Integrated and Interdisciplinary Approach to Worker Well-Being") in which we instead argue for an integrated and interdisciplinary approach to worker well-being. When real people work, their work consists of multiple aspects. Individuals in paid jobs likely experience elements of the economic concept of disutility when their work is stressful and conflicts with desires for more leisured pursuits. But also experience elements of the psychological concept of fulfillment when their work brings psychological rewards or pain when their work is experienced as arduous and unfulfilling, of identity creation and affirmation (either positive or negative), and perhaps sometimes elements of caring or serving others. Unpaid homemakers whose work involves a lot of caring responsibilities also experience disutility as some features of caring are stressful and take time away from valued leisured pursuits, fulfillment from the intrinsic rewards of caring for others, and aspects of identity development.

We therefore outline a broad approach to thinking about worker well-being that includes the following major dimensions: Pay and Benefits (e.g., an adequate income and conomic security); Safety, Health, and Body Work (e.g., protection against workplace hazards and unwanted intimacy); Psychological and Mental Health (e.g., positive levels of job satisfaction and avoidance of undue stress); Skill and Creativity (e.g., opportunities for skill development); Autonomy over Work (e.g., opportunities to control how and what work is done); Freedom, and Voice (e.g., freedom to quit, occupational choice, ability to form independent labor unions); Governance and Ownership (e.g., opportunities to participate in how work is managed); Nondiscrimination and Respect (e.g., nondiscrimination protections); Caring (e.g., opportunities for directly caring for others and avoidance of conflicts that prevent the fulfillment of caring responsibilities); and Serving Others (e.g., opportunities for directly serving others and avoidance of conflicts that interfere with ability to serve others). For more details, see our paper.

We hope that this spurs broader approaches to worker well-being that adequately reflect the sheer diversity of the roles of work in our lives, as well as the tremendous importance of work for individuals and the communities in which they live.