Does Employee Happiness have an Impact on Productivity?

Abstract

This paper provides evidence from a natural experiment on the relationship between positive affect and productivity. We link highly detailed administrative data on the behaviors and performance of all telesales workers at a large telecommunications company with survey reports of employee happiness that we collected on a weekly basis. We use variation in worker mood arising from visual exposure to weather—the interaction between call center architecture and outdoor weather conditions—in order to provide a quasi-experimental test of the effect of happiness on productivity. We find evidence of a positive impact on sales performance, which is driven by changes in labor productivity – largely through workers converting more calls into sales, and to a lesser extent by making more calls per hour and adhering more closely to their schedule. We find no evidence in our setting of effects on measures of high-frequency labor supply such as attendance and break-taking.

JEL Classification: JEL, D03, J24, M5, I31