Lindsey Cameron, Management, The Wharton School, and Jirs Meuris, Wisconsin School of Business
Abstract: As employers abdicated their role as the primary risk bearer in employment relationships, they increasingly relied upon variable compensation strategies. In turn, a substantial proportion of the current labor force became prone to experiencing pay variability, defined as variance in earnings from paycheck to paycheck. Here, we combine multiple sources of qualitative and quantitative data to explore the conditions that shape the experience of pay variability among those employed in lower-wage jobs. Exploratory interviews and surveys from gig workers, ride-hailing drivers (N = 63), revealed that pay variability often represents an adverse experience for these workers because it introduces uncertainty in their ability to meet their financial needs. Combining the insights from this data with cognitive appraisal theory, we subsequently proposed that pay variability will increase the likelihood that these workers distance themselves from the job through voluntary turnover. However, we expected that workers were more likely to do so when (a) paychecks frequently fell below the average, (b) they saw no ability to manipulate their earnings through their own actions, and (c) their household was highly dependent upon their earnings. Using matched individual-level survey and archival data from a sample of truck drivers (N = 711) employed by a national transportation company, we found that paycheck dispersion is positively associated with the likelihood of turnover, though this relationship was attenuated under the predicted conditions. Taken together, our findings demonstrate that variable compensation strategies can be implemented in ways that are less harmful to workers in lower-wage jobs.