Working Hard for More Money or Working Hard to Make a Difference? Efficiency Wages, Public Service Motivation, and Effort

The issue of how much to pay government employees to ensure optimum effort level is a complex one. Government employees are generally reported to be less motivated by high wages than their private sector counterparts. There is substantial empirical evidence that many performance-based pay schemes are either meaningless or dysfunctional in the public sector. Yet, it is common knowledge that most people do not seek employment without expecting some sort of remuneration for their effort. Drawing on the efficiency wage theory and public service motivation (PSM) literature, this article constructs a model to examine the relationship of wages and PSM in determining the effort levels of the public sector workforce in 15 countries that include the United States, Great Britain, and Australia.