Are There Unintended Effects of Changing Health Worker Compensation?

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Jed Friedman, from the World Bank, wrote an interesting post about the potential impacts of paying-for-performance for health workers. He notes, that in some cases, introducing extrinsic motivation may decrease intrinsic motivation and end up having the opposite effect of actually decreasing the behavior that is supposed to be encouraged. In three studies described in the post, introduction of monetary compensation led: to 1) a decrease in donations collected; 2) more lateness; and 3) decreased support for allowing nuclear waste in ones neighborhood.

In some programs for maternal health, such as Janani Suraksha Yojana in India where community health workers are compensated for bringing women to facilities for delivery, extrinsic motivation has been introduced. Does this mean that we can expect worse outcomes because health workers in India won’t be intrinsically motivated? Friedman isn’t convinced:

The three studies above clearly suggest that the introduction of monetary incentives can affect behavior in a contrary way to the intention of the policy maker.

An important distinction to bear in mind, however, is that in these last three examples (and unlike the Lazear example) all involve the introduction of a monetary incentive where one did not exist before. In these contexts, the motivation for and the interpretation of the now incentivized task may undergo a fairly extreme transformation in the minds of the subjects. Will this transformation occur in the minds of health workers offered a performance incentive? Remember these workers are already in a career for which they are compensated.

I tend to believe that it is quite demotivating to work in a remote clinic with broken equipment, intermittent salary payments, no easy access to clean water, and perhaps lackluster district supervision. Income is not merely the means to consume goods but also perceived by many as a marker of social worth. Thus I would not be surprised if the additional extrinsic motivation of a performance incentive complements, and not “crowds out,” any pre-standing intrinsic motivation. But the jury is out so let’s see what we learn.