Reciprocity and Public Policy
The feasibility of egalitarian policies, based on the belief that everyone deserves equal rights and opportunities, may be explained by humans’ predisposition to reciprocity. Yet, there are individuals who despite this predisposition, are politically opposed to social welfare policies. In a 1998 study, Bowels and Gintis offered an explanation for how the principles of reciprocity that promote egalitarian policies may also be responsible for their opposition.
They analyzed a 1990 study by Christina Fong, in which nationally representative surveys were conducted. The two questions of focus were about whether participants supported an increase or decrease in expenditure on welfare policies, and why they thought the poor were poor. It turned out that 49% of those who believed poverty was due to a lack of effort also believed there was too much expenditure on welfare. On the other hand, 44% of those who thought lack of effort was irrelevant to poverty believed too little was spent on welfare.14 This belief, that effort is an important determinant for success, was a stronger indicator for opposition to welfare policies than the participants’ years of schooling, income, and parents’ socio-economic status combined.14 Evidence from this study corroborated with that of several past studies.
In conclusion, Fong found less support for welfare policies that reward people regardless of their contributions to society because they are considered unfair.14 This is an important concept for policy makers to consider: although they may harness the norm of reciprocity to garner support for social policies, there are possibilities it may backfire and instead generate opposition.
Reciprocity and Contract Enforcement in the Labour Market
Contracts between employers and employees are often unable to define and measure intangible phenomena such as effort, leaving ambiguous gaps in contractual agreements. The fulfilment of these gaps thus relies on reciprocal motivations.12 Gächter and Kerchsteiger conducted an experiment in 1997 to assess how reciprocity plays a role in choice and amount of effort. The experimental employer was asked to come up with a wage contract that included a set wage and a desired effort level from the employee. This desired level, however, was not the same as the minimum required level. While the employee could then choose their effort level, the employer was bound to pay them the agreed-upon wage. In theory, employees could opt to put in the required minimum effort, and employers could compensate with the lowest possible wages. The experimenters were interested to see if this would induce employers to offer low wages.12
The employers made generous compensation offers. Fourteen percent of the workers reciprocated the offers by maintaining the desired level of effort, while 83% of workers shrunk in their efforts from the desired level, but not to the expected minimum effort level. Their efforts were still substantially higher than the minimum. Gächter and Kerchsteiger found that employees are willing to reciprocate generous compensation by putting in more effort than required.12 Employers must take into consideration the role of reciprocity in contracts – paying more and giving larger incentives does not always have to mean loss. Instead, it can increase productivity and growth.