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HR Policies and Maternal Labor Supply

The Example of Employer-Supported Childcare

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Susanne Schneider

The author asks how far the extension of employer-supported childcare serves as a driver for higher maternal labor supply. She addresses this question by categorizing employer-supported childcare as an efficiency wage introduced by the employer to increase the working volume of mothers. Applying various impact evaluation techniques in an econometric analysis, the author concludes that the availability of employer-supported childcare has a positive impact on the length and working volume of mothers who return back to work after giving birth. Furthermore, the usage of employer-supported childcare by mothers with pre-school age children influences the amount of agreed and actual working hours positively.

 

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4. The Theoretical Construct of ESCC

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4.  The Theoretical Construct of ESCC

The goal of this chapter is the design of a suitable theoretical framework. The literature review on ESCC identified three main groups regarding the theoretical contextualization of ESCC in dependence on the outcome variables. Firstly, some studies (for instance Casper & Buffardi (2004), Ratnasingram, Spitzmueller, King, Rubino, Luksyte, Matthew & Fisher (2012)) analyze the effect of ESCC on intentions to pursue or quit a job by means of the organizational support theory (Eisenberger, Fasolo, & Davis-Lamastro, 1990). The organizational support theory is rooted in the social exchange theory by Blau (1964). Secondly, there are studies which refer explicitly to the social exchange theory. Feierabend and Staffelbach (2015) as well as Gullekson, Griffith, Vancouver, Kovner, and Cohen (2014) use the theory by Blau to investigate the effect of ESCC on organizational commitment. Both groups of researchers analyze the impact of ESCC on non-material returns for the employer. This means, that there is no direct economic benefit for the employer, but rather a cultivation of a relationship between employer and employee. In the social exchange theory, the return of the employee to the job is defined as being non-material, meaning that it is mainly reflected in the commitment of employees towards their employer (Cropanzano & Mitchell, 2005). Work output, then, is not measured directly in terms of productivity or working time, but rather indirectly through measuring loyalty. The third group investigates the effect of ESCC on employees’ perceptions of work-life balance. Their work applies the work-life boundaries theory by Greenhaus et al (1987). This group can be distinguished from the two other groups since their studies focus explicitly on the benefits for the employee, but do not explicitly, but rather implicitly, address the employers’ benefit of ESCC. The here presented approach differs to the three approaches. The relevance of this study derives from the divergence between the actual and preferred employment rates of mothers and the relation to restricted childcare prospects. The goal of the thesis aims to reveal whether ESCC can fill this gap or not.

The starting point is the Homo Economicus. External incentives, may be argued, might increase or decrease work motivation. In order to appropriately address this issue in the context of ESCC and maternal labor supply, Akerlof’s gift-exchange theory is quite helpful. It is an efficiency wage model, stating that higher wages may increase the efficiency of workers, making it worthwhile for the employers to offer wages exceeding a market-clearing level. This theory implies that people pursue only their own self-interest and do not care about “social” goals (“Homo Economicus”). Akerlof extends this neoclassical approach by adding a sociological dimension. He states that “in every social context, people have a notion of who they are, which is associated with beliefs about how they and others are supposed to behave” (Akerlof & Kranton, 2010, p. 4). This notion influences working behavior as well. It is also known as the “corporate identity.” Finally, Herzbergs motivation ← 87 | 88 → theory permits a systematical derivation of which external factors might be influential in the relationship between ESCC and maternal labor supply.

4.1  Derivations from the neoclassical standard model

In economics, one dominant concept of a human being is called the Homo Economicus. This model states that humans act consistently rationally and are narrowly self-interested agents who generally pursue their subjectively defined goals in an optimal way (Kirchgässner, 2008). Thereby, the human being tries to maximize utility as a consumer and profit as a producer. This model can be applied in many areas of economics, for instance in private households as part of consumption theory, in production, or in theories concerning the market equilibrium. It contradicts concepts of behavioral economics, which focus on actual economic behavior, including, for instance, cognitive bias. The goal of this section is to illustrate that the assumption of a straightforward positive relationship between ESCC and maternal working behavior is not guaranteed as may be assumed in standard economic theory and based on the previous information, explaining, criticizing, and extending the theory of Homo Economicus. As a result, prosocial preferences can be assumed to play an indispensable role.

4.1.1  Assumptions and limitations of the Homo Economicus

The Homo Economicus became famous in the late 19th century as defined by John Stuart Mill as “a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained” (Mill, 1874, p. 48). During this time, the model was still known as the economic man. In the late 19th century, mathematical models were built on these assumptions. The following paragraphs discuss the prevailing assumptions of the Homo Economicus as part of twenty-first century economics. Thereby, the interaction with sociological and psychological perspectives will be highlighted, responding to substantial amounts of criticism the Homo Economicus model receives from economics.

In economics, the human behavior is marked by the interaction of four units of action: preferences, restrictions, scarcity, and alternatives. Firstly, preferences reflect the intention of individuals. They show “the individual’s ideas of value as they have been developed during the process of his socialization” (Kirchgässner, 2008, p. 12). Preferences are characterized as being stable, exogenous, and independent of actual possibilities of action. In the sense of preferences, human behavior can be regarded as a rational choice considering all alternatives available. Human beings assess the advantages and disadvantages, the pros and cons, costs and benefits, of alternatives and then decides what meets their needs or preferences. Preferences can be goal-, risk-, or time-oriented. Altogether, Sen and Williams (1982, p. 15) define preferences in economic terms as „utility maximization under constraints with uncertainty.“ Secondly, “[r]estrictions limit the individual’s leeway of action” (Kirchgässner, 2008, ← 88 | 89 → p. 12). Restrictions develop from external incentives and limitation of human action. Exemplary restrictions are income, prices, or opportunity costs. Moreover, restrictions can also be time-, social-, or legal-related (Frey, 1990). Thirdly, scarcity, Alchian and William argue “given the limitations of nature and the unlimited desires of man, (…)[is] inevitable and pervasive (Alchian & William, 1964, p. 12).” This implies that individuals have to choose between alternatives, as several needs are understood as impossible to satisfy simultaneously. Fourthly, the assessment of alternatives for human action results in the behavior of individuals. These four concepts make up the corner stones of human action and are used to explain the Homo Economicus framework, providing a more explicit tool to analyze human action in economics. The framework of the four units of action functions with certain key assumptions which characterize the Homo Economicus. These assumptions are essential for the establishment of the Homo Economicus (Kirchgässner, 2008) and address rationality, the axiom of self-interest, methodological individualism, the consideration of “average” individual behavior, and the distinction between preferences and restrictions.

Firstly, it is assumed that the Homo Economicus is acting purely rationally. Rational behavior is independent of the place or situation in which the individual is acting. Thereby, norms and rules of behavior are relevant since they can influence the preferences of individuals when weighing alternative options. This implies that individuals adapt, meaning that they can adjust their behavior to environmental conditions. Furthermore, Kirchgässner argues that individuals make decisions systematically: adjusting to certain conditions, for instance time pressure. Then, the individual is disposed to pay costs for additional information if he expects a relevant re-orientation in the assessment of possible alternatives. The individual reacts to this change in a systematic fashion, defined by “neither […] chance nor randomly, but also not in a strongly traditional manner by keeping strictly to given rules independent of the concrete situation” (Kirchgässner, 2008, p. 16). As a consequence of systematic rational behavior, it can be expected that individuals reconsider their alternatives when receiving new information, thus behavior can be, in some way, predicted. In this context, Führ (2003) highlights as one condition of acting as a Homo Economicus that the Homo Economicus must know all alternatives of action and is able to react in an optimal way to newly acquired cost-free information. On this basis, he makes decisions.

The second assumption addresses preferences, namely self-interest. In short, it implies that “the individual acts exclusively according to his own interests” (Kirchgässner, 2008, p.15). Attitudes like benevolence, altruism, envy, or malevolence are excluded in the decision-making process. While the individual is aware of the fact that he is living as part of society, he is indifferent to the behavior of other human beings. Their interests are just considered if they affect the individuals’ range of action. Rawls (1971, p. 144) calls this behavior “mutually disinterested rationality”.

The third and fourth assumption address the individual behavior in the context of the collective. Frey (1990) argues that methodological individualism says that the behavior of the individual leads to the behavior of the collective. Contrary to the methodological holism, it is not assumed that collectives are self-reliant. Rather, ← 89 | 90 → just individuals are able to act in a self-interest oriented way. The aggregation of individual decisions reflects collective behavior like for instance in households, companies, or trade unions. Thereby, it should be noted as the fourth assumption that it is not the purpose of observing singularized individuals, but group-specific behavior, traced through the aggregation of individual actions. The average behavior is preferred to acquire central implications for exemplary households or companies (Volkmann, 2003). Generally, the collective is able to exercise influence on individuals through action preferences, restrictions, and creating a framework for decision-making.

Finally, it is assumed that there is a strict division between preferences and restrictions. It is assumed that preferences are constant and infinite. Restrictions can change and influence the behavior of individuals. The changing nature of restrictions can show how individuals react to changing incentives (Benz & Frey, 2002).

To sum up, the framework for Homo Economicus regards human beings as utility maximizers, who are self-controlled, rational, and self-interested, as human beings who have no prosocial preferences. This rationality implies that cognitive limitations result in systematic suboptimal decisions being disregarded and self-control implies that emotions are not considered in decision processes. However, it is questionable if all these prepositions can be found in real human behavior. Or, as Thaler (1996, p. 227) puts it, “Humans are dumber, nicer, and weaker than the Homo Economicus.”

Already in 1937, Coase argued that acquiring information to choose between alternatives is costly. These costs are defined as transaction costs, which do not arise during the production of goods, but which originate at the handover and surrender of goods (Coase, 1937). Führ (2003) argues that these costs include both research costs and manufacturing costs when working on the information process. Moreover, there are decision making costs and supervision costs. Consequentially, the human being decides in form of a cost-benefit analysis. Hence, transaction costs lead to a non-optimal assessment of the alternatives when making decisions. Kirchgässner (2008) points out that individuals cannot consider all alternatives comprehensively due to time pressure. Therefore, it cannot be assumed that individuals are able decide systematically under the assumption of complete information. Kirchgässner (2008) highlights that it should be regarded as restricted rationality contrary to full rationality, since decisions are always grounded by a certain framework. The bounded rationality should not be mistaken for irrational or volatile decision maing, but rather seen as a weakened rationality.

The assumption of rationality thus is, especially from the psychological perspective, questioned. For example, prospect theory highlights situations in which individuals do not act rationally (Kahneman & Tversky, 1979, 1992). Here, individuals are not able to decide on the basis of rationality since there are boundaries to their logical evaluation capacity. Individuals assess alternatives based on the current, and subjective, situation and chooses accordingly. In addition, how one structures winning and losing factor into making decisions. ← 90 | 91 →

Both examples show that the prediction of standard economic theory, that the promise of higher payments connected to measurable performances always leads to increased performance, does not hold. Prosocial preferences are assumed to play a determining role in the context of this study.

4.1.2  Pertinence of social preferences

One concept which is mostly mentioned when criticizing the Homo Economicus refers to social preferences. Social preferences are defined as the behavior of individuals, not guided by self-interest, but fair and reciprocal preferences. Preferences must be regarded as dependent on the individual motivation, since individuals do not always act in accordance with the balance between self-interest and rationality.

Based on a widespread review on prosocial behavior, Osterloh, Weibel and Wieman (2014) highlight two reasons for prosocial behavior in economic situations. Firstly, there are two further “intrinsic motivation propensities”, next to the standard economic assumption of egoism (Osterloh et al., 2014, p. 75). Reciprocity is conditional on the prosocial behavior of other people. In other words, an individual is behaving reciprocal if he rewards friendly and cooperative behavior of other individuals and in turn punishes unfriendly behavior. The punishment might even inhabit material costs for the individual. The reason to reciprocate especially kind actions lies in moral obligation. This is different from altruism, which is not conditional. Altruism shows the tendency of an individual to pay a personal cost to provide benefits to others (Fowler & Kam, 2007). Hence, an altruistic-oriented individual is acting unselfish, while the reciprocal individual acts based on a give and take model. A tight relationship exists between reciprocity and fairness: The basis of reciprocal behavior is the understanding of fairness, which includes the fair distribution of resources.

Prosocial behavior also demonstrates both intrinsic and extrinsic motivational types. Extrinsic motivation is guided by external incentives for the individual, which can appear in form of awards or penalties. The incentives for instance, may be in form of money, or mediation. However, solely extrinsic motivation cannot explain prosocial behavior. Intrinsic motivation is equally valued and appears to be self-sustained. It is regarded as the direct satisfaction of needs (Osterloh & Frey, 2000), “The ideal incentive system is in the work-content itself, which must be satisfactory and fulfilling for the employees.” The existence of an intrinsic motivation shows employees' interest in their work. Thereby, it can be differentiated between two kinds of intrinsic motivation (Andreoni & Miller, 2002). One, there are hedonistic preferences implying self-service. Two, intrinsic motivation can be directed at others, which is part of someone’s preferences of action, leaving the actor feeling positive about themselves. Lindenberg (2001) argues that the latter kind of motivation derives from internalized social norms. Both kinds of intrinsic motivation can be regarded as plastic and can be influenced systematically by institutions. For instance, curiosity or interest can trigger intrinsic motivation. ← 91 | 92 →

Osterloh et al (2014) connect this to the psychological oriented self-determination theory (Deci, 1980; Deci & Ryan, 1985), which, according to them, is the main reason for the renunciation to the Homo Economicus. Both behavioral economics and self-determination theory assume that there are different kinds of motivation. While self-determination theory calls this intrinsic an autonomous motivation, Osterloh et al (2014) highlight that the differentiation between different types of extrinsic motivation is not essential for economics; it is evident that economists’ understanding of intrinsic motivation “includes what SDT views as identified – or integrated extrinsic motivation and as pure motivation” (Osterloh et al., 2014, p. 75). Moreover, both disciplines agree on the distinction between prosocial behavior as the wish to assist other people while individuals want to fulfill a task. Contrary to self-determination theory, behavioral economics focuses on the effects of these preferences, while self-determination theory tries to detangle the differences between both.

Critics of Homo Economicus are especially relevant here, since the model considers individuals as solely motivated extrinsically. The individual reacts in a rational self-interested way. Hence, he changes his behavior systematically through incentives from the outside, but he neglects the motivation coming from the inside.

4.1.3  Interaction of extrinsic and intrinsic motivation

The following definition by Locke and Latham (2004) is used to operationalize motivation in this context and identifies the influence of people's acquisition of skills and the extent to which they use their ability. According to the authors, "the concept of motivation refers to internal factors that imply action and to external factors that can act as inducements to action. The three aspects of action that motivation can affect are direction (choice), intensity (effort), and duration (persistence). Motivation can affect both the acquisition of people's skills and abilities; and also the extent to which they utilize their skills and abilities" (Locke & Latham, 2004, p. 388).

In behavioral economics, extrinsic and intrinsic motivations demonstrate a more than just additive relationship. Frey (1997) argues that both types of motivation act in a predictable manner. This section will address the different kinds of relationships between the two kinds and assess which forces influence them. Here they distinguish between the crowding out effect, which inhabits that “intrinsic motivation for an activity can be repressed by extrinsic rewards (or punishments) and by certain forms of control” (Osterloh et al., 2014, p. 76). Thereby, it can be differentiated between crowding out through pay-for-performance and crowding out through formal control. Crowding in includes that certain institutional set ups may raise the intrinsic motivation for a task. This might happen through participation, fairness, market-driven wages, or normatively affected decision-making contexts.

Starting with the crowding out effect through pay-for-performance, Osterloh et al (2014) highlight that there are three different underlying mechanisms restraining the influence of incentives on the intrinsic motivation. This effect is also known as the hidden cost of reward (Greene & Lepper, 1978). The psychological theory of ← 92 | 93 → cognitive evaluation (Deci, 1980; Frey, 1997) forms the starting point for self-determination theory and examines negative impacts of rewards on motivation through unobservable cognitive processes. Thereby, the concept of the locus of causality introduced by De Charms (1968) analyzes when intrinsic motivation descends to extrinsic motivation and when external incentives come into play. The perceived locus of causality focuses on individuals’ attitudes towards certain behaviors by considering the internal and external locus of causality simultaneously. The internal locus of causality refers to one’s perception towards tasks regarding endorsements. The external locus of control refers one’s actions in response to external circumstances. Applying this knowledge to the situation at hand, the external locus of control refers to the extrinsic motivation while the internal locus of control can be ascribed to intrinsic motivation (Deci, Connell, & Ryan, 1989). External conditions can provide information and give individuals the feeling of self-determination, which has the goal to strengthen internal loci of causality and consequentially the intrinsic motivation. However, the perception of self-determination can be diminished if it is perceived as controlling (Deci, Koestner, & Ryan, 1999). The perceived feeling of loss of self-determination can shift the intrinsic motivation to predominantly existing as an extrinsic motivation since individuals perceive the external locus of causality as counteracting intrinsic motivation. This observation implies that incentives, which are either characterized by punishment orientation or tight observation, replace intrinsic motivations if perceived as too controlling and limiting to voluntary engagement.

The second theory explaining supplanting effects is called goal-framing theory and stems from Lindenberg (2001, 2006). Here, the central argument is that all human behavior is goal-oriented, implying that several goals influence the orientation of motivation. There are always some goals competing with each other. There are three prevailing frameworks enabling distinct kinds of motivations. The hedonic frame focuses on the intrinsic motivation, the normative frame establishes prosocial motivation, and the gain frame highlights extrinsic motivation. For example, rewards marked by a tangible and contingent nature might strengthen the gain frame but push the hedonic and/or normative frame to the background. A task which seemed to be interesting and enjoyable in the first place seems to be less appropriate if a strong gain frame is introduced. In this context, incentives need to strengthen an individual’s moral obligation and simultaneously de-emphasize the competing gain and hedonic frame to be effective.

The third mechanism of crowding out refers to the information aspect deriving from extrinsic motivations (Benabou & Tirole, 2003). External incentives might reveal that the principal either does not trust him or wants to transfer a displeasing task to the agent. Hence, contingent rewards might reveal that some tasks are less interesting, which consequentially does not strengthen intrinsic motivation. This phenomenon is known as the signaling effect of prices. This concept has been developed based on volunteering behavior, which is reduced due to the introduction of external incentives. The signaling effect of prices might hence be revealed if individuals perceived a task as highly symbolic for them, but this perception ← 93 | 94 → disappeared once a certain external price is determined (for instance in case of blood donation) (Bolle & Otto, 2010). Without the external compensation, individuals acquire the feeling of a warm glow when they regard themselves as acting prosocial, which confirms their self-understanding of being intrinsically good. As soon as fines or rewards are linked to these issues, “people face the possibility that their contributions are rather motivated by extrinsic incentives than by high moral values as originally assumed” (Osterloh et al., 2014, p. 77). Consequentially, the individuals do not pursue these tasks anymore with the same motivation.

Independent of the three presented methods, Frey and Jegen (2001) highlight three conditions leading to crowding out effects in terms of pay-for-performance. Firstly, the task was originally intrinsically motivated. Secondly, the incentive is interpreted as a monitoring device. Thirdly, extrinsic motivation is generated by reward, which does not counterbalance the loss of intrinsic motivation.

Formal control is defined as the “purposeful influence of the regulation on an individual’s behavior through hierarchical authority, which leads to the attainments of institutional goals” (Osterloh et al, 2014, p. 79). Thereby, formal control tries to influence extrinsic motivation in form of describing common goals. Achievements are supervised, depending on compliance: individuals can be rewarded or sanctioned. Weibl (2010) mentions two conditions under which formal control can negatively affect intrinsic motivation: employees regard it as external influence, which is often regarded as “at odds” with the need of autonomy, and formal contracts can influence social relations between employer and employee. This signals suspicion and intensifies the hierarchical distance between the person, who is controlling, and the person, who is controlled. The negative effects of formal control can be diminished if the controlled person perceives trust by the supervisor.

While pay-for-performance and formal control can trigger crowding-out effects, there are several types of situations, which might promote crowding in. The first two situations discussed here are tightly related and exemplify participation and organizational fairness. Participation is defined as codetermination at work (Osterloh & Frey, 2000). A higher degree of codetermination at work increases the intrinsic work effort of individuals. Self-employed individuals have a far higher intrinsic motivation (Osterloh et al., 2014). Concerning organizational fairness, Tyler and Blader (2000) argue that intrinsic motivation and the prosocial behavior of employees can be positively affected if the working procedures are perceived as fair, which occurs when active participation is supported. This implies that employees expect appreciative treatment, neutrality, codetermination, impartiality, and respect. Thereby, it can be differentiated between two kinds of attitudes (Maier, Streicher, Jonas, & Frey, 2007): individuals with an inherent personal need for distributive justice related negatively to intrinsic motivation, individuals having an inherent personal need for procedural justice see intrinsic motivation as positive. Human beings with a strong intrinsic motivation more often attempt to achieve competence and autonomy for themselves and others. On the contrary, human beings susceptible to extrinsic motivation as a consequence experience less of an intrinsic motivation. ← 94 | 95 →

According to Lindenberg (2006), individuals are more likely to fulfill a task or put effort into something if the decision-making frame reveals that prosocial behavior is expected, which is called normatively shaped decision-making. Ariely, Bracha, and Meier (2009) call this attitude “image motivation” and place it next to intrinsic and extrinsic motivations. This motivation refers to the individuals to acting pro-socially because they want to be considered as good by others and themselves. This observation is in line with the observations by Benabou and Tirole (2003) presented earlier.

The fourth factor of the crowding-in mechanism refers to market-driven wages. Akerlof (1982, 1984) argues that wages can reinforce the intrinsic motivation of employees if they perceive it as a signal of the company’s goodwill and as an appreciation of employee performance. This is known as the gift exchange between employer and employees, which will be discussed in detail below. In reference to the pay-for-performance mechanisms of the crowding-out effects there is a strengthened focus on high fixed wages. High fixed wages are related to self-esteem, trust, and intrinsic motivation (Benabou & Tirole, 2003), as it has been proven that fixed pay is interpreted as a sign of trust. Consequentially, employees who are reacting to social norms are more likely to increase their efforts under high fixed pay, compared to variable pay schemes.

4.1.4  Expanding intrinsic motivation through lower-order needs fulfillment

The previous section has revealed that incentives and payments by the employer might increase or decrease the intrinsic work motivation of employees. This section addresses additional factors which could influence the effects of incentives on the work motivation. Therefore the following utilizes content theories assessing individuals’ needs and examining the determinants within a person that stimulate or stop certain behaviors (Reid, 2002), assuming that there is a complex interaction between both external and internal motivational influences. The circumstances determine in how far individuals react to different types of external and internal stimuli (Bassett-Jones & Lloyd, 2005).

In 1943, Maslow published a needs-based framework for human motivation, leading to the model entitled “hierarchy of needs” (Maslow, 1954). The basis of Maslow's motivation theory is that human beings are motivated by unsatisfied needs and a hierarchy and order within which they need to be addressed. The basis of Maslow's motivation theory is that human beings are motivated by unsatisfied needs, and that certain lower factors need to be satisfied before higher needs can be satisfied. There are general types of needs (physiological, survival, safety, love, and esteem) that must be satisfied before a person can act unselfishly. He called these needs “deficiency needs”. As long as individuals are motivated to satisfy these cravings, individuals are able to move towards growth, or self-actualization. Satisfying these needs is healthy and prevents gratification, which makes us sick. On the basis of this theory, Herzberg’s hygiene versus motivators framework (Herzberg et al., 1959) was introduced, which analyzes the notion of job enrichment in relation to organizational behavior and applied psychology. Contrary to Maslow, who based ← 95 | 96 → his idea of the concept of human needs and their satisfaction, Herzberg made use of motivators which include achievement, recognition, and opportunity for growth.

In essence, this “dual factor” theory proposes that job satisfaction and job dissatisfaction are different states that result from different forces. The two feelings cannot simply be treated as opposites of one another. The opposite of satisfaction is not dissatisfaction, but rather no satisfaction. Similarly, the opposite of dissatisfaction is no dissatisfaction. They argue that they are two distinct human needs portrayed. Firstly, there are psychological needs that can be fulfilled by money for example, to purchase food. Secondly, there is the psychological need to achieve and grow. This need is fulfilled by activities.

Job satisfaction was proposed to derive from “motivators” (i.e., characteristics related to the nature and content of the job itself, such as opportunities to achieve, recognition, interesting work, responsibility, and the possibility to grow and advance within the organization). By contrast, job dissatisfaction was thought to result from “hygiene” factors (i.e., characteristics related to the context of the job, such as policy and administration, supervision, interpersonal relations, working conditions, salary, status, and security). These factors are not part of the work itself, but rather external factors. They need to be fulfilled before an individual is able to develop work motivation.

Herzberg calls the motivators higher-order needs and the hygiene factors lower-order needs. The lower-order needs need to be fulfilled prior to higher-order needs. Thereby, the higher order needs contribute to intrinsic motivation through lower-order needs.

Figure 4-1: Hygiene and motivation factors of Herzberg et al (1957)

image20

Source: Own design on basis of Herzberg et al (1957) ← 96 | 97 →

In case that the hygiene factors cannot be regarded as fulfilled, individuals are regarded as unsatisfied. If the hygiene factors are regarded as fulfilled by the employee, they are taken as self-evident and have no additional motivational meaning. Missing hygiene factors can just partly be counterbalanced by motivators. According to Herzberg et al (1957), employees are able to be simultaneously satisfied and dissatisfied with their employment situation.

In the context of this study, the hygiene factors are primarily interesting which will be discussed in more detail in section 4.3. The theory by Herzberg et al. is privileged here, since Maslow argues that all lower-order needs must be satisfied before one progresses to higher-order needs. On the contrary, Herzberg et al. do not see the factors as a closed cycle, meaning that there is variation in the assessment of individual importance for employees. In the context of this thesis, the hygiene factors are of primary interest since they are factors, which can be actively by employer, or at least addressed. Meanwhile, the motivation factors are coming from the inside of the employee, inhabiting that they are outside the sphere of being influenced. Accordingly, ESCC does not change their value.

4.1.5  Work motivation and maternal employment

The previous section has demonstrated that there are various reasons influencing intrinsic and extrinsic work motivations. Before structurally assessing the factors individually, it pays to clarify Frey’s intrinsic motivation and Herzberg’s hygiene factors and how they relate to maternal employment.

Herzberg has extended the traditional view on satisfaction and dissatisfaction as influencing factors for work motivation, which eventually influences work output.

Figure 4-2: Contrasting views on satisfaction and dissatisfaction

image21

Source: Own design

The different views on satisfaction are quite relevant for HR managers, since they can adjust their policies in a way to elicit a stronger work motivation amongst workers. The idea that motivators contribute to intrinsic motivation through the fulfillment of the basic needs is consistent with the theory of self-determination by Deci and Ryan (1985), which is used to explain the crowding out effect of intrinsic ← 97 | 98 → motivation as seen by Frey. The self-determination theory emphasizes psychological versus physiological needs, whereby psychological needs include competence, relatedness, or autonomy. Physiological needs include food and water. In Herzberg’s theory, motivators would fall within the category of “social circumstances and task characteristics” that contribute to satisfying psychological needs. According to the self-determination theory, work conditions are important since they contribute to the fulfillment of higher-order needs.

Herzberg suggests that to improve job attitudes and work behavior, HR managers must recognize both sets of characteristics and cannot assume that an increase in satisfaction results in a decrease of dissatisfaction. Hence, it should not be assumed that introducing external incentives leads directly to an increased work output. HR managers need to recognize that there is mostly an heterogeneous internal labor market, which inhabits that individuals react in a different way to HR policies (Boxall, Purcell, & Wright, 2007). For instance, the reaction towards economic incentives might depend on the qualification, economic sector, or personal work experience of an employee (see section 4.3).

The heterogeneity of the employee includes non-work specific obligations. Based on the traditional economic labor supply model, the consideration of family as an economic unit influences the priorities between market versus non-market times substantially. Having a child influences the labor supply, since somebody needs to take care of the child. Child minding is time consuming or costly if outsourced. If a mother takes care of the child herself, this time is considered spent with a non-market activity. Every hour of work is at the expense of one hour of leisure, and for every hour of work, formal childcare has to be provided (Blau, Ferber, & Winkler, 2006). While these considerations are made mostly within the household context, Becker (1993, pp. 37–38) argues that a gendered division of labor emerges, because women “have a heavy biological commitment to the production and feeding of children” while men “have been less biologically committed to the care of children.” Next to the biological assignment of mothers taking care of children, the societal norms and values might be, to a greater or lesser degree, focused on mothers as caretakers. Duncan, Edwards and Reynolds (2003) even argue that economic constraints and social policy are subordinated to cultural context or social norms when addressing personal choices. Based on the psychological perspective, childcare development might be negatively affected by maternal employment since mothers spend less time at home and cannot foster the children’s cognitive development. In early childhood, breastfeeding may be important for the physical development of the child and the child’s cognitive and social skills could depend crucially on the mother-child relationship, where caretakers cannot function as an appropriate substitute. The quality of non-maternal care is assumed to affect the mothers’ decisions through altering the psychological costs and benefits of work versus unpaid family care, although economic concepts have not considered this explicitly (Lindberg, 1996; Roe, Whittington, Fein, & Teisl, 1999). These considerations influence the “mother’s guilt” (Fogli & Veldkamp, 2011), implying that mothers feel guilty if they work instead of caring for their children, linked to societal understanding of ← 98 | 99 → working mothers. Feelings of guilt result from behavior not corresponding to one’s own ideal of what a mother should do – taking care of children full-time (Akerlof & Kranton, 2000). The psychological perspective might be influenced by prevailing social norms. Thereby, it can also be that mothers are likely to consider higher-quality formal care as a more suitable substitute for their own care time (Ermisch, 2003).

Independent from economic, sociological, or psychological dimensions, HR managers are aware that their workforce might consist of employees in general, but include mothers specifically with heterogenic attitudes towards maternal labor supply. It can be assumed that mothers do not act in a purely self-interested way, but consider the well-being of their children when making employment decisions (Ermisch, 2003).

Based on the previous discussion starting with the description of the Homo Economicus and ending with specific issues employed mothers are facing, the following questions arise: Does the gift-exchange approach help to explain potential effects of ESCC on maternal employment? Can ESCC be regarded as an incentive to push the crowding-in effect? Which external factors might influence maternal employment and in which direction?

4.2  ESCC conceptualized as an efficiency wage

4.2.1  Origin of gift-exchange theory: Efficiency wage models and social exchange theory

As already mentioned, the gift-exchange theory by Akerlof explains human behavior extending an economic framework with sociological thoughts. The following provides an overview of the economic foundation of gift-exchange theory, introducing efficiency wage models. The underlying idea of efficiency wage hypothesis refers to a microeconomic foundation of earnings rigidity and involuntary unemployment. The explanation for earning rigidity or respectively the question, why involuntary unemployed people are not able to enforce a wage less than the going wage rate, does not explicitly access to systematic differences between the preferences for risk between the two labor market parties. However, it is based on the causal relation of a positive correlation between labor productivity and real wages earned. Hence, “if wage cuts harm productivity, then cutting wages may end up raising labor costs” (Yellen, 1984, p. 200).

Since employers have the possibility to increase their profit by paying efficiency wages, they have an interest in adapting their earnings offers in accordance with full employment on the labor market. Their main interest does not refer to the national economy, but the earnings, which minimize the labor costs per efficiency unit. If the earning is above the level of the market clearing, the employer does not need to be afraid of constraints regarding the labor supply. In fact, the equilibrium of the labor market is characterized by the existence of involuntary unemployment. As a consequence, the company is not willing to decrease the efficiency wage to the level of full employment, since this would reduce the productivity of their employees. ← 99 | 100 → This reduction in productivity is not offset by the decreased wage costs (Sesselmeier & Blauermel, 1998). The following figure shall illustrate the relation between the efficiency wage and its consequences on the labor market.

Figure 4-3: Work input in dependence on the wage

image22

Source: Weiss (1990)

The figure shows the expected labor input of a randomly chosen employee on the vertical axis Q(w) as a function of the wage input w. The optimal (efficiency) wage w* sits where the vector from the origin is tangent to the curve. Simultaneously, this is the maximum point for Q(w)/w. This wage can be solely justified due to the main assumption of the efficiency wage theories, namely that incentive measures are introduced due to imperfect and asymmetric information. Weiss (1990, p. 20) states it as follows, “Recall that in a perfect information model with no incentive effects of wage w*=0.” The information from this figure can be transferred to the figure with a labor supply and demand curve:

Figure 4-4: Labor supply and demand curve in connection with efficiency wage

image23

Source: Weiss (1990) ← 100 | 101 →

This figure includes the labor supply and demand curve in dependence on efficiency wage considerations. As a result, the labor demand curve leans backwards (LD) while the labor supply curve (LS) raises. According to the general argumentation, labor demand decreases with an increasing wage rate. Since employers organize labor according to the efficiency wage, in other words labor to the cheapest price in terms of efficiency units, this point w* determines the amount of labor demand. This amount of labor in demand does not change even if a greater labor demand could be realized at a lower wage level, since this lower wage level would not meet the expectations of the employer. The extent of unemployment depends thereby on the level of labor supply. Generally, no employer would pay a wage below w*, since it would increase labor costs, which in turn affect the competitiveness of the company. An equilibrium can only be established in w* or above, in case that the labor supply curve cuts the labor demand curve on the left hand side of w*. If the intersection between the two curves is at the right hand side of w*, unemployment exits. It can also happen that the labor supply curve cuts the labor demand curve twice. This situation is represented here:

Figure 4-5: Equilibrium in case of several intersection points

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Source: Weiß (1990)

In case that labor demand and labor supply curves intersect at two points, just the upper intersection w1 can be regarded as maintaining an equilibrium. W0 is no equilibrium since there is an excess demand for labor between w0 and w1, which will be met by the employer with higher wage levels until w1 is met. The efficiency wage hypothesis refers to the principal-agent problematic: It is not possible to identify and control the exact performance of the employee by the employer. Akerlof and Kranton (2010) mention three factors why specific monetary incentives often do not work in practice. Firstly, teams of workers, instead of individuals, often produce output together. As a consequence, the potential results which could serve as a basis for compensation are not directly or just weakly related to the performance of an individual worker. The compensation of work for the whole team might then ← 101 | 102 → overcompensate certain employees and undercompensate other employees. Secondly, many employees do need to work on several tasks at the same time. This means rewarding just some of the tasks would lead to a concentration on these tasks and negligence of other tasks. Thirdly, it can happen that compensation is dependent on the relative performance of an employee, for instance in the case of the competition for a promotion. Since the employees are compensated for relative performance, these competitions decrease the necessity of information provided to the employer. Akerlof and Rachel highlight that another problem might arise due to competitions between employees: employees may see competition as an incentive to sabotage the work of other employees. In conclusion it may be argued that (Sesselmeier & Blauermel, 1998):

  1. the labor supply side, in other terms the employee, is able to vary their performance without the labor demand side, or employer, being able to observe changes completely. There is asymmetric information with regard to the working intensity.
  2. the employee, who is solely following the economic driven process of optimization, can be substituted by the employer, who controls the wage. By definition, this employer can determine the marginal productivity of labor with the efficiency wage, by being above the market clearing level. However, the general neoclassical assumption remains that the wage level corresponds to the value of the marginal product of labor.

The absorption of distortions in the economic demand does not derive from change in real wages, but is due to changes of the demand of labor, and due to the quantitative adjustment of labor potentials. The wage structure within companies remains intact and employers stick to their goals which are, next to maintaining the efficiency wage, the growth in labor productivity and a decrease of information costs.

There are four main approaches to explain efficiency wages, categorized in accordance with advantages seen by the employer: (1) the gift-exchange approach uses a sociological approach to explain that norms influence the working behavior (Akerlof, 1982, 1984); (2) the shirking model argues that if employees receive a higher wage, the cost of losing their employment status raises and this acts as an incentive for workers not to shirk and thereby reduce the risk of being fired (Shapiro & Stiglitz, 1984); (3) the labor turnover approach sees businesses offer wages in excess of market-clearing due to the high cost of replacing workers (search, recruitment, training costs) (Stiglitz, 1974); (4) the adverse selection perspective applies to firms faced with a larger pool of applicants due to higher wages which can increase their hiring standards and thereby lead to a more productive work force (Weiss, 1980). Contrary to other approaches of explaining behavior (for instance game theory), the mentioned ones are outstanding due to the consideration of norms and emotions. The following will focus on the gift-exchange model to explain changes in work behavior due to ESCC. ← 102 | 103 →

After having provided the economic foundation of the gift-exchange model, the following paragraph explains the distinct characteristics of social exchange.11 The concept of social exchange is derived from Blau (1964) and used to explain social interactions that employees experience within their organizations. It can be a basis for the subsequent discussion (Brandes, Dharwadkar, & Wheatley, 2004) as it is marked by a personal relationship, including a mutual concern and empathy for the other (Brass, Butterfield, & Skaggs, 1998). There is no time limitation placed on the exchange leading to a natural exchange of interactions (Blau, 1964). And the participating parties do not disclose the value of the gift they provide for the other party. The explicit mention of value would indicate subsequent motives, such as self-interest. The receiver would perceive the values as an undermining of the exchange relationship. This situation is also known as the taboo of calculation. The non-disclosure of the gift exchange lowers concerns about the actual resources being exchanged (Mauss, 1967). The social context of the gift exchange is highly significant. A gift may have an emotional value to a receiver that is deemed equivalent to a more impressive gift that was exchanged to the other party. However, when there appears to be an imbalance in the exchange of gifts, like for instance one party feels that it is giving more than it is receiving, the aggrieved party will focus more attention on the exchange process, which may negatively affect the relationship (Blau, 1964). There is a high potential to develop trust between both parties as well, however, since parties make themselves vulnerable. A gift-giving party risks disappointment when there is no reciprocity forthcoming from the partner (Blau, 1964).

4.2.2  Description of gift-exchange theory

As already mentioned in the previous section, the gift-exchange theory by Akerlof (1982, 1984) incorporates sociological elements in an economic framework to explain wage rigidities, because sociological elements include new insights in the analysis of economic examinations. Thereby, Akerlof (1984, p. 204) highlights that “the sociological model can explain phenomena which seem inexplicable in neoclassical terms: why firms don’t fire workers who turn out to be less productive, why piece rates are avoided even if they are feasible, and why firms set work standards exceeded by most workers.” Social conventions and group norms are essential to this approach, seen as Akerlof defines social categories and norms as follows, “People divide themselves and others into social categories. And social categories and norms are automatically tied together: people in different social categories should behave differently. The norms also specify how people of different types – different social categories, in our new vocabulary – should treat each other” (Akerlof & Kranton, ← 103 | 104 → 2010, p. 11). The loyalty of employees to the operations of the firm is as an important factor for labor productivity (Akerlof, 1984). The efficiency wage can be interpreted as an expression of a normative consensus between labor market parties. The model of Akerlof is based on the idea that labor relations build on the principle of exchanging gifts. Thereby, employers pay wages above the comparable wages in the market. In response, employees are willing to supply a greater work effort, which could not be enforced by companies under the usual labor market conditions.

Akerlof’s arguments refer to a study of Homans (1954), who provides an example of a group of young female employees (“Cash posters”), whose labor output was significantly above the average standard working output of the company. The company did not offer performance-linked payments, opportunities for promotions or other incentives, yet it was easy for the company to control the output of the workers. From the neoclassical perspective, it could be questioned why the company did not increase the standard working output and fire non-productive employees. In the same vein it is unclear why the group of young female employees did not decrease their working output to the standard working output. Akerlof (1982, p. 548) uses sociological arguments to explain this phenomena.

The sociological perspective on work behavior of groups contains that norms of a certain working group are finally the influential factor for the working output of the employees. This assumption is the starting point for the extension of the neoclassical perspective within the gift-exchange approach. Akerlof (1982) refers to a study of Mayo (1949, p. 70), “The working group as a whole actually determined the output of individual workers be referenced to a standard, predetermined, but clearly stated standard that represented the group’s conception of a fair day’s work. The standard was rarely, if ever, in accord with the standard of the efficiency engineers.” Thereby, it is easier for an employee to assess whether the working conditions and the wage can be regarded as fair for himself within a working group. These thoughts can be applied to the principle of the gift exchange in a similar way. The worker’s output is freely determined as long as he/she meets the standard working output. Every additional unit of output above the standard can be interpreted as a gift from the employee to the employer. For the employee, the gift refers to a payment which is above the level of payments in the market. Here, advantageous arrangements for both parties are met which are based on certain norms (or in Mayo’s words standards.) This norm can be compared to the norm which includes the exchange of gifts at Christmas. This gift exchange can be regarded in the context of employer-employee relationships classified as “trading relationships” (Akerlof, 1982, p. 549) or reciprocity: if one entity gives something in order to deepen the relationship, this entity also gets something in return. While it can also be argued that some gifts are not regarded as gifts for recipients, but rather as something unnecessary or inadequate, Akerlof refers here to the development of emotions at the workplace. He argues that employees develop friendly sentiments towards other employees and towards the employer. And then “it is natural that persons have use for making gifts to institutions to which they have emotional ties” (Akerlof, 1982, p. 550). In Mayos (1953) words, if objectives of organizations are to be met, one must attempt ← 104 | 105 → to understand, respect, and consider emotions and needs of workers. He believed that employees are not just concerned with money but also need to have their social needs met to be motivated. He is of the opinion that workers enjoy interactions and that managers should respect their opinions. A further effect of the development of sentiments concerns the relationship towards co-workers. “If workers have an interest in the welfare of their coworkers, they gain utility if the firm relaxes pressure on the workers who are hard pressed; in return for reducing such pressure, better workers are often willing to work harder” (Akerlof, 1982, p. 550).

The inclusion of the influence of norms by Akerlof is an additional variable in the general utility function of wage and effort. This variable depends inter alia on the level of the unemployment rate, the height of the support for unemployed people and the respective utility function of colleagues. For example, the employer cannot pay individual performance related earnings, but group earnings. The utility of the individual employee increases when the pressure on the colleagues is smaller. This behavior, which can be interpreted as a gift from the company, reflects a sociological concept, implying that working groups react in different situations as one unit, whose members share certain standards and attitudes (Blien, 1986). Furthermore, the sense of justice of the employee is considered here: The employees need to regard the wage in context to their own performance, and in the context of other employees on the same level, as fair. This fair wage depends on several criteria (Akerlof, 1982):

Perceived fair wage of the individual

Actual wage of the individual in previous periods

Wage paid of others in the individual’s reference set in current and previous periods

Unemployment benefits of individuals in the reference set in current and periods

Number of unemployed in the reference set in current and previous periods

Individual’s work rules in current and previous periods

The gift-exchange model describes therefore the existence of involuntary unemployment with the reaction of the employer on the changes in behavior of the employees. The employees deliver a greater work output as long as they feel treated fairly. The wages above the market clearing wage induce involuntary unemployment. “If there is involuntary unemployment in an equilibrium situation, it must be that firms wish to pay more than the market-clearing wage. And that is the heart of any efficiency-wage theory” (Akerlof, 1984, p. 79).

4.2.3  Application of gift-exchange theory to ESCC

The following applies the characteristics of a social exchange to ESCC. Afterwards, the propositions of Akerlof’s description will be adapted to function within this study’s parameters. The five above-mentioned characteristics of social exchange stated that it is a personal relationship with an infinite time horizon, that the value of the gift cannot be disclosed, the social context of the relationship is highly ← 105 | 106 → important, and that there is the potential of developing a trust relationship between both partners.

With regard to the first characteristic, generally, child raising is a matter of the private life of employees, which can be clearly assigned to non-work related tasks. Hence, it is not the responsibility of an employer to facilitate the reconciliation of caring and working. Consequentially, it can be argued that ESCC influences the relationship between both the employee and employer in a personal way built on a mutual concern. While it may be assumed that there is certainly a self-interest by the employer, it should be noted that others kinds of HR policies can be pin pointed to groups of employees, which might increase their work efforts, especially mothers. With regard to the time horizon, an indefinite nature could be interpreted in terms of an unlimited contract. However, it should be noted that ESCC with employees having termed contracts should not be excluded from this analysis, since there is on the one hand the possibility of extending the contract and on the other hand, the child is growing, which includes that parents are not dependent on ESCC over its lifetime. Concerning the disclosure of value of the exchanged resources, it is difficult to quantify the benefits of using ESCC. While some mothers would argue they save time due to the location of ESCC, others could argue that the perceived support makes the difference. Hence, this requirement for a social exchange can be regarded clearly fulfilled. The fourth characteristic concerns social context. Arguing from a psychological perspective, parents would certainly not include unvented actors in their childcare. Thus it can be assumed that mothers who are using ESCC have a kind of positive emotional reference to their employer. Altogether, the previous four characteristics have proven that ESCC might be a potential instrument to develop trust between the employee with childcare obligations and the employer.

The gift-exchange theory by Akerlof (1982, 1984) says that firms can increase norms of working groups or average effort by paying employees a salary (=a gift) which is higher than the required minimum salary. In return, the work effort of the employees is higher than the required minimum effort. Akerlof (1982, p. 362) defines this situation as a “norms of gift-exchange. On the worker’s side, the ‘gift’ given is work […] and on the firm’s side the ‘gift’ given is wages.” Thereby, this efficiency salary is regarded as the normative consensus between the two parties. Akerlof points to two characteristics of the efficiency wage: firstly, it is paid by the employer and the employee does not pay for it. The employee reacts in return due to receiving the efficiency wage. This means, the employee does not pay money for it, but it is worth for the employer to offer the efficiency wage since the employee changes the work behavior through it. Secondly, the difference between the standard wages on the market and the paid wages, which are above this standard wage, are regarded as a gift in terms of an additional salary. In other words, the efficiency wage can be interpreted as a monetary incentive. While monetary incentives are common, they are not the only ones (Rosenstiel, 1975). The nature of incentives can vary and be expressed in different ways. Rosenstiel (1975) regards the organization‘s culture, communication systems, interpersonal relationships, location, and image as possible incentives. In the context of the gift-exchange model, the incentive is ← 106 | 107 → what lies measurably above the standard provided on the market. The provision of ESCC can hence be regarded as a gift by the company, if it is not the standard on the labor market to provide childcare support.

Balkin and Richebé (2007) discuss in how far organizational training can be regarded as a gift in the context of the gift-exchange model by Akerlof. Their steps will be applied to the context of ESCC.

Table 4-1: Application of ESCC on gift-exchange theory

Components of gift-exchange theory Application to ESCC
Efficiency wageESCC can be provided in different ways
Purpose of efficiency wageEmployees receive support in the organization of their childcare obligation.
Expected returns of efficiency wageEmployees with childcare obligations increase their working time
Reasons for loss of expected returns from ESCC Employer or employee violates gift-exchange rules: ESCC cannot be interpreted as an efficiency wage if the parents do not increase their working time through it
Which party is expected to pay for ESCCEmployer pays the organizational costs of ESCC and the employee pays the contribution, which needs to be paid for public childcare as well

Source: Extended on the basis of Balkin and Richebé (2007)

This table provides an overview of the components of the gift-exchange theory and its application on ESCC. The purpose of the introduction of ESCC by the employer is the expectation that the employee will reciprocate. The employer has an obligation to the employee once introducing ESCC. Employees with childcare obligations are expected to return the gift by increasing their working time. For mothers, this can be interpreted in two ways: it can either be an increase in the weekly working time or it can concern the time to the return to work after childbirth. The introduction of ESCC may also not be regarded as a gift-exchange, in the case that one of the two parties violates the rules of the exchange. From the side of the employer, it might be that the provision of childcare stops suddenly and the mother can no longer rely on its provision. From the perspective of mothers, this can be regarded as a violation of the gift-exchange rules. In turn, if she benefits from ESCC but does not increase her working time, she violates the terms. With regard to the payments for ESCC, the employer is responsible for the provision of the childcare facilities. While the original gift-exchange model by Akerlof did not consider payments on the side of the employee, the situation might be different here. While childcare is not free in ← 107 | 108 → Germany, and parents need to pay for it, it can be that the employees need to pay partly for ESCC. The organization of ESCC is however on the side of the employers.

The heterogeneity on the labor market – and especially in internal labor markets – is an important consideration for employers when implementing a gift. It is important to know which employees can be motivated by incentives via gift exchange. It is widely acknowledged that social preferences, like reciprocity or inequity aversion, potentially do not only shape labor market behavior, but find consideration when incentive schemes are developed (Lepak & Snell, 2007). Falk (2007, p. 1510) states that “ultimately the successful initiation of a gift-exchange relation depends on attribution, that is, how kind, generous, or fair a particular action or gift is perceived by the recipient.” The perception can depend on the workers’ characteristics in terms of human capital and their social preferences or on the institutional characteristics of the company. Employers might design and deploy HR incentives that motivate certain employee attitudes and behaviors while discouraging others. Lepak and Snell (2007) state that the decision of an employer to introduce certain incentives might depend on the company’s long-term strategy. For example, if a company wants to develop innovative and creative products, their incentives might include offering workshops on creative thinking. Lepak and Snell however do not mention that a company could also try to motivate distinct employee groups by introducing certain incentives.

4.3  Determinants for maternal employment decisions in a gift-exchange setting

After applying ESCC to the gift-exchange setting, this section discusses factors that may influence the relationship between maternal working behavior and ESCC and is divided into two parts focusing on both human capital and the hygiene factors established by Herzberg. Thereby, it is important to note that the hypotheses approach the relation between an efficiency wage and maternal labor supply influenced by third factors, rather than the relationship between third factors and maternal labor supply.

4.3.1  (Firm-specific) human capital

Current debates on human capital are substantially influenced by the work of Becker (1964). Human capital explanations are intended to explain phenomena which cannot be explained sufficiently by means of the traditional neoclassical model. They provide the implicit framework for the observation of a heterogenic workforce. For instance, distributions in the income level within a company depend on the diverse labor supply due to different investments in education. The central concept of human capital investments refers to all actions that influence productivity in the future. Therewith, the portfolio in human capital forms the productivity related capacities influencing the income. By integrating the qualification of individuals ← 108 | 109 → in the production process, the individual becomes a good. This good can be then improved on by promoting further education or expanding the working capacities.

The relationship between investments in human capital and working income are solved in dependence on the neoclassical optimization problem. This implies that someone invests in human capital as long as the marginal costs of the investments equal present value, which are established by accounting for marginal costs. In analogy to an investment, it is assumed that there is an education model. In case that investments in human capital are conducted in form of education, it is expected that the productivity of the supplier is increased. According to the neoclassical model, the salary equals the marginal productivity of labor. Consequentially, a higher salary may follow an increase in productivity. The investments derive from the sum of monetary costs for the education plus time-related opportunity costs in form of a decreased salary during education and reduced free time. Work interruptions go along with a depreciation of human capital as time spent on other activities might hinder a return on the investment (Blau et al., 2006). Assuming that ESCC facilitates the working situation for mothers, the following hypothesis arises:

Hypothesis 1. The higher the human capital of a mother, the more likely she increases her working behavior due to ESCC.

Concerning the human capital, it has been argued that too narrow a definition of human capital in terms of formal qualification might bias the actual productivity of an employee. Becker (1964) differentiated between general and specific human capital, in dependence on who invests. General education is financed by the state or the individual itself, while specific human capital is mostly acquired through job training. This implies that the employer is financing it. Human capital is “to be defined by generic knowledge and skill, not specific to a task or a company” (Alan, Yochanan, & Josse, 2008, p. 20). It is predominantly accumulated through education. This knowledge embedded in an individual can be transferred to different industries and companies. Firm-specific human capital is predominantly accumulated through on the job training and working experience within a company. This kind of human capital is hard to transfer to other industries or even companies. The expected contribution of an employee to the company might be enhanced by a resulting psychological contract (Schein, 1980). This implies that the employee inhabits a leadership position or has an extraordinary degree of autonomy. Productivity might be enhanced through informal arrangements unrelated to the formal education. In line with this argumentation, Lepak and Snell (2002) developed a model highlighting how higher contributions of an employee influence the employment mode, which in turn influences the acceptance of HR policies. Consequentially, the following hypothesis arises:

Hypothesis 2. The higher the firm-specific human capital of a mother, the more likely she increases her working behavior due to ESCC. ← 109 | 110 →

4.3.2  Hygiene factors

Section 4.1.5 “Work motivation and maternal employment” concluded with the statement that it can be expected that female employees with childcare obligations are a heterogenic group. Their reaction to external incentives might be dependent on individual attitudes, personal circumstances, or prevailing norms. This section discusses the hygiene factors of Herzberg et al (1959) as potential drivers for the influence of ESCC on working behavior. These are company policy and administration, the relationship to the supervisor, the working conditions, the status and satisfaction with salary, some working with several distinct hypotheses.

The first category is called company policy and administration. Herzberg et al (1959, p. 47) mention that “some over-all aspects of the company” influence the motivation of individuals at work. Thereby, personnel policies are highlighted. They put it in a rather drastic way by stating that the effects of company policies are either positive or “malevolent”, but not ineffective. A positive effect of certain company policies is supported by Greenhaus and Powell (2006), who demonstrate that a satisfying performance in one area of life (for instance at the workplace) can have spillover effects onto other fields of life (for instance at home). Thereby, they argue that the selection of the policies is however substantial; for instance, corporate-sponsored elderly support might affect a wider span of the employees compared to ESCC. Moreover, it is also a greater task to satisfy the needs of a greater target group. Hence, the supporting positive effect of further policies should be focused on the target group.

Hypothesis 3. Mothers are more likely to increase their working behavior due to ESCC if their employer offers explicit HRM for employees with childcare obligations.

Another dimension of this category refers to the economic sectors. The different economic sectors are marked by distinct working environments and employee attitudes. An overwhelming distinction is made between the public and private sectors. Frey, Homberg and Osterloh (2013) argue that intrinsic motivation in the public sector is just expanded by external incentives with certain characteristics (for instance in form of awards). These characteristics are not fulfilled by ESCC. It is however argued that employees in the public sector have a greater intrinsic motivation compared to employees in the private sector, if their work is related to the contribution of public goods with the purpose of doing good for others or society. This statement seems to be valid for the health and education sector, independent of businesses public or private nature (Perry, 1997).

Hypothesis 4. The reaction of mothers on ESCC depends on the economic sector.

a. Mothers are less likely to increase their working behavior due to ESCC if they are generally working in the public sector. ← 110 | 111 →

b. Mothers are more likely to increase their working behavior due to ESCC if they are working in the health sector.

Concerning the differences amongst companies in the private sector, Frey and Osterloh (2000) argue that crowding in is supported when incentives are introduced unexpectedly. The introduction of incentives in unexpected situations might strengthen this effect. Consequentially, the initial position, independent of the efficiency wage, must be considered. Flynn (2005) concludes that the reaction to efficiency wages depends on the degree of unionization within a sector. The unionization of a sector depends in turn on the degree of completeness of the contract. Incomplete contracts do not specify actions and payments for all possible contingencies. They contain gaps that must be filled by negotiation, convention, or formal dispute resolution procedures. Complete contracts specify the respective rights and duties for every possible future state of the relationship between both contracting parties (Klein, 2014). For example, due to the nature of production processes, assembly line industries prefer complete contracts since workers either keep up with the line or not. In these situations, there is little possibility to introduce gift-exchange settings in which employees give greater effort in exchange for higher wages. As a result, the employees in these situations are prone to unionization. In sectors marked by incomplete contracts, however, like knowledge-intensive work, gift-exchange and reciprocity are already in place (Krueger & Summers, 1988). The employers want to maintain a positive and productive labor-management interaction, which can be guaranteed through benefits in the employees’ interest. Hence, it can be expected that a higher degree of unionization decreases the likelihood of efficiency wages, but, if an efficiency wage is introduced, workers are likely to react to them. Independent of unionization, a lower wage level is mostly associated with a greater reaction towards a newly introduced efficiency wage compared to a higher wage level (Lang & Leonard, 1987).

c. Mothers are more likely to increase their working behavior due to ESCC if they are working in production-based sectors.

d. Mothers are less likely to increase their working behavior due to ESCC if they are working in knowledge-based industries.

e. Mothers are more likely to increase their working behavior due to ESCC if they are working in the service sector

Herzberg et al (1959) highlight that interpersonal relationships at the workplace are especially important in times of changes. These changes might appear either at the workplace itself, for instance due to restructuring processes, or in an employee’s private life (for instance becoming a parent). The relationship to the supervisor is especially relevant here, as the supervisor can discourage or encourage employees and thereby affect their work attitude. Additional support for this premise comes from the perceived supervisory support theory. Coming from the psychological perspective, it started with the perceived organizational theory saying that if managers are concerned with their employees’ commitment to the organization, employees ← 111 | 112 → are focused on the organization’s commitment to them (Eisenberger, Hungtington, Hutchison, & Sowa, 1986). In 2002, the same authors proved that perceived organizational support stems predominantly from perceived supervisory support. “Because supervisors act as agents of the organization, who have responsibility for directing and evaluating subordinates’ performances, employees would view their supervisors’ orientation toward them as indicative of the organization’s support” (Eisenberger, Stinglhamber, Vandenberghe, Sucharski, & Rhoades, 2002, p. 566). The authors argue that a supervisor who is powerful and has a high (informal) status is even more influential for the behavior employee than the company itself.

Hypothesis 5. Mothers are more likely to increase their working behavior due to ESCC if they perceive their supervisor as supportive.

Herzberg et al (1959) mention as a further external factor the working conditions which influence the physical conditions at work. In the context of maternal employment, working time is one determining factor. Since public childcare availability is often constrained in terms of opening hours or flexibility, mothers often need to adjust their working time accordingly. “Buying” external childcare at the weekend or adjusting it to irregular schedules might be more expensive than regular care. However, it needs to be noted that informal care might be more easily available during irregular times as the partner or family may work during standardized time. Nevertheless, the latter argument should not be included in these derivations as a constant and regular childcare opportunity, but rather in terms of emergency care (Blau et al., 2006).

One way of getting independent of restricted childcare opening times deals with flexible working arrangements (Blau et al., 2006). A certain degree of flexibility in the working arrangements is helpful in situations like the illness of a child. Hence, mothers without flexible working arrangements might value ESCC to a greater degree compared to women benefiting from it, under the assumption that ESCC is adapted to the needs of the employees.

Hypothesis 6. Mothers who are not able to use flexible work arrangements are more likely to increase their working behavior due to ESCC, compared to mothers who are able to use flexible work arrangements.

The previously stated assumption is also relevant for the following hypothesis. It was argued that external childcare at irregular times may be more expensive and informal childcare may not provide a consistent alternative, but rather function as emergency care.

Hypothesis 7. Mothers primarily working at irregular times are more likely to increase their employment rates due to ESCC.

Herzberg et al argue that the personal situation can be relevant for the expansion of work motivation if “some aspect of the job affects personal life in such a way that the effect was a factor in the respondent’s feeling about his job” (Herzberg et al, ← 112 | 113 → 1959, p. 49). This includes, for instance, family problems rooted in the job situation. While Herzberg et al. refer to the influence of private life on working life, the opposite trajectory may be equally important: the work-family border theory by Clark (2000) states that people are daily cross-borders between the domains of work and family. According to Clark, work and family constitute two different spheres of the individual, which influence each other constantly. Both spheres are defined by its own culture and purpose. The connection between both domains may require individuals who experience a certain degree of uncomfortableness in one domain to try and separate both domains as far as possible. Even if there are incentives in one domain to support the other domain, individuals rather stick to a separation of both.

Hypothesis 8. Mothers who perceive their work as stressful and too demanding do less likely increase their employment rates due to ESCC.

While the decisive factor might not be working arrangements of the mother, but the childcare situation as itself, the expected behavior to efficiency wages depends on the extent to which employees assess one incentive as useful. Eventually, the greater the effect of the perceived benefit, the more likely that an employee changes its behavior (Gross & McMullen, 1983).

Hypothesis 9. Mothers are more likely to increase their working time due to ESCC if they perceive their current childcare situation as less satisfying.

Herzberg et al. argue that the status is only relevant if there is “some sign or appurtenance of status as being a factor in his feeling about the job” (Herzberg et al, 1959, p.49). A similar approach is supported by Ajzen (1991). The theory of planned behavior draws a distinction between individuals' attitudes toward a behavior and their normative beliefs. Hence, individuals assess for themselves what others think they should do. The assessment is consequentially a precursor of the planned behavior. Indeed, the opinions of colleagues or superiors are important for employees when deciding about the adoption of family-friendly HRM (Powell, 1997). According to social identity theory (Turner, 1975), people tend to organize themselves and others into various social categories. One of these categories is employees with childcare obligations. As one pushing factor for career-oriented women, Lewis (1991) suggests a male-oriented pattern of working. Using family-friendly benefits means diverging from male-oriented patterns of working and reveals a social identity of lesser value in a work context. Thereby female employees with childcare obligations with a strong career orientation might increase their employment rates when they are using ESCC to overcompensate the recognition of being a mother.

Hypothesis 10. Mothers are more likely to increase their employment rates due to ESCC if they state that establishing a reputation in their job is important for them.

Herzberg et al. (1959) mentioned that the salary is relevant here if there are “unfulfilled expectations” due to an unsatisfying salary. Additional support for this premise comes from the fair wage hypothesis (Akerlof & Yellen, 1990). According ← 113 | 114 → to the hypothesis, workers have a conception of what constitutes a fair wage. If the actual wage is less than the fair wage, employees supply a corresponding fraction of normal effort. As a consequence, employees react more strongly to an efficiency wage if they generally perceive themselves as fairly treated by the employer.

Hypothesis 11. The higher the satisfaction with the salary, the more likely a mother increases her employment rates due to ESCC.

4.4  Critical acclaim and concluding remarks

Before summarizing the main implications of this chapter, there needs to be a critical assessment of the present theories, starting with Herzberg’s dual-factor theory. The theory is widely accepted in the field of human resource management. However, some points of critique have continuously been raised. For instance, Reid (2002) highlighted that Herzberg’s theory is an examination of job satisfaction rather than work motivation. If hygiene factors, such as a low salary, are not addressed, the full effect of intrinsically rewarding factors cannot be felt. Moreover, Brenner, Carmack, and Weinstein (1971) highlight that their and other studies examined that the employees received job satisfaction and job dissatisfaction from both the motivating and hygiene factors, rather than that motivation affected job satisfaction and hygiene factors job dissatisfaction. Latham and Locke (1979) argue that job satisfaction and dissatisfaction result from different causes.

Within the scientific discussion, some points of critique on the gift-exchange theory have emerged. Most of these points were discussed by Sesselmeier and Blauermel (1998). Scheuer (1987) says that the recourse by Akerlof on the study of Homans (1954) is critical. Scheuer argues that the behavior of the working group was due to egotistic reasons rather than the interpretation of Akerlof. The friendly emotions Akerlof raises are probably strongly dependent on the working atmosphere within the company, so that positive as well as negative effects correlate. In addition, the recourse to the sociological study of Mayo (1949) by Akerlof is critical as well, both studies focusing on the retention of employee performance. Thereby, the impression arises that the recourse to the sociological studies does not serve with the intention to include their explanations of group behavior of employees. Rather, it could be that the references to the sociological studies serve as a purpose of explaining this behavior. Blien (1986) criticizes that Akerlof connects the emergence of positive emotions to the company and to the colleagues as “natural”. Blien argues that any behavior can be explained by presuming a certain preference to the actor, which has the intention to achieve this preference. This behavior is simultaneously means and ends in itself, and thus doubled within the theory, which can be described as “tautological doubling.” Franz (1986) criticizes that a (gift) exchange has underlying intentions and thus cannot be regarded as a present, but rather needs to be termed an investment. Nevertheless, it should be noted that even very high ← 114 | 115 → wages can just motivate employees to a certain degree. Turning a performance into a top performance takes conviction.

Considering these criticisms, using Akerlof’s gift exchange theory for the analysis of ESCC as a non-monetary efficiency wage seems to be applicable still. Especially since several studies have done so beforehand.12 Herzberg et al.’s work motivation theory has not so far been used in the context of the analysis. It seems, however, a useful strategy since it includes working factors as well as private factors. This provides a multi-methodological approach to investigating (maternal) labor supply, where most previous work focused on monetary aspects.13 ← 115 | 116 →


11 The concept of a social exchange is contrary to the economic exchange, which is characterized by an impersonal and self-interest relationship, a short-term character, the value is disclosed, the social context is insignificant, and there is a low potential of developing trust between both parties (see for a summary Balkin and Richebé (2007)).

12 For an overview see Ashenfelter and Card (2011).

13 For a discussion see Chaudry, Henly, and Meyers (2010).