The purpose of this paper is to estimate the impact of a pay-for-performance (PFP) rule change on US Department of Defense (DoD) employees’ job satisfaction by looking at changes in the DoD’s National Security Personnel System.
The data for the analysis are derived from the 2002, 2004, 2006 and 2008 Federal Human Capital Survey. A difference-in-differences (DID) quasi-experimental methodology was used to examine the effect of a PFP rule change on DoD employee job satisfaction. The Department of Air Force and Navy are analyzed as a proxy for the DoD. This study also undertakes a subgroup analysis strategy to understand the effect of PFP systems on specific subgroups (classified by gender, race and supervisory status).
This study’s results indicate that the overall effect of the introduction of a new PFP rule at DoD is a decrease of approximately 7.9 percentage points in employee job satisfaction, which is a substantial negative effect. In addition, this paper further finds that DoD’s PFP system has widened the gender gap in job satisfaction at DoD.
This study contributes to both the theoretical and the empirical understanding of PFP systems and public employee work morale and attitudes.
