We examine how workers reacted to a pay cut in a sales call center setting in the United States. The pay cut was implemented by raising two pre-existing sales targets, that is, by "moving the goalposts". Using a difference-in-difference approach, we show that among the workers who experienced the pay cut, some chose to leave the firm (exit); others generated abnormally high customer refunds, in a way that hurt both them and the firm. (We define this work practice as counterproductive.) The firm believed, and we present evidence, that these workers intentionally sold the wrong items, as opposed to simply optimally shirking on effort in response to the pay cut. We show that the most loyal workers (those with longer tenure) expressed themselves only through counterproductive work practices and not through exit. Less loyal workers reacted more strongly than loyal workers, and did so through a balanced mix of exit and counterproductive behavior. To our knowledge, this is the first study to document individual-level patterns of exit and (counter-) productivity following a pay cut and, how these differ for high-versus low-loyalty workers.
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)