The impact of love and money on performance in the Federal Government : Implications for pay for performance

I summarize what we can learn from personnel economics about the likely empirical veracity of the statements from OPM and ICMA asserting the efficacy of pay-for-performance for public employees. I then provide empirical evidence from the U. S. federal government showing that, controlling for indicators of human capital, agency location, and many other variables, that individual discretion on the job and intrinsic satisfaction with the job are more predictive of a (subjective) measure of individual performance than pay satisfaction and pay for performance (i.e., detailed lists of “objective” measures, or closed contracts). Higher salaries predict higher performance, but the relative impact of objective pay is less than the impact of intrinsic values and discretion.