The relation of incentive pay to affective and cognitive workers’ well-being

In this thesis incentive pay is examined in relation to workers’ well-being. I separately study the relation of incentive pay to affective and cognitive workers’ well-being to determine if a difference exists between affective and cognitive workers’ well-being. Further, incentive pay is divided into bonuses and future income increases to study differences in the relation of the two types of incentive pay. The role of gender and risk attitude is examined as an explanation for the relation of incentive pay to affective and cognitive workers’ well-being. I use cross-sectional and panel data of the German Socio-Economic Panel (GSOEP) to empirically test the relation of bonuses and future income increases to affective and cognitive workers’ well-being. I find that bonuses and future income increases are not associated with affective workers’ well-being. I further show that bonuses do not affect cognitive workers’ well-being, but future income increases do increase cognitive workers’ well-being. This relation of future income increases to cognitive workers’ well-being cannot be explained by gender and risk attitude.