Performance-related Pay: Mental and Physiological Health

Abstract

Much of the literature on performance-related pay (PRP) and poor health relies on self reported data, and the relationship is difficult to examine due to confounding variables. We examine the relationship between PRP and three groups of health measures using data from the UKHLS: blood pressure, inflammation markers in blood and self-reported health. Regressions correcting for self-selection bias and socio-demographic covariates find that PRP contracts are associated with poorer mental health, higher systolic blood pressure and higher levels of fibrinogen. These findings suggest that firms that use PRP may need to implement policies to mitigate against PRP-related stress.