Labor Principles

Surprise Incentives

Each year employees participate in Color Wars, where the employees are divided between two teams to see which team can sell the most during the day. Glenn announces that the winning team will receive a pizza party. While the employees aren’t overly happy about either the Color Wars or the pizza party, incentives can usually be a way to induce higher levels of productivity. It turns out that each team member also receives $100, but Glenn was saving it as a surprise incentive. Amy has to explain to him that incentives need to be announced at the beginning in order for them to actually work.


A Pharmacist’s Salary

Tate has no problem sharing his salary, but it’s unclear the main driver of the salary. In reality, salaries are comprised of a variety of skill and compensating differentials as well as potential efficiency payments. Tate has a doctorate of pharmacy, which should result in higher pay for human capital investments. In the clip above he mentions that people could die if he messes up, which probably adds a lot of pressure to his workday. This pressure could be a compensating differential that increases his pay. However, there’s also a chance he’s paid highly so that he doesn’t goof off, which would be an efficiency payment.