Job security, socio-economic background, and worker performance: Evidence from Major League Baseball

Abstract

Using a panel dataset of contract-year observations for Major League Baseball (MLB) players, this study looks to understand how job security affects incentives for worker performance. Prior works have found evidence of diminished performance when job security is high in the early years of guaranteed contracts (shirking) and heightened performance when job security is low at the end of contracts when players are hoping to secure new contracts (opportunistic behavior). The focus of this study is on how socio-economic background interacts with job security to influence performance. Theory and empirical evidence suggest that workers from disadvantaged socio-economic backgrounds may care more about job security, which could subsequently lead the performance of such workers to be more affected by changes to job security. This hypothesis is tested empirically. In testing this indirectly, evidence of stronger impacts of job security on performance of MLB players from lower income countries relative to those from higher income countries is found. To directly test this hypothesis, data on player socio-economic backgrounds is hand-collected. The performance of players from less-advantaged socio-economic backgrounds is found to be more affected by job security. Given that job security is common in many work settings, these findings have implications for workers and employers both inside and outside of sports.