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Is Poor Worker Morale Costly to Firms?

In 1985 and 1990 studies, Norsworthy and Zabala reported evidence supporting the hypothesis that declining worker morale has reduced productivity and productivity growth. This study partly replicates Norsworthy and Zabala's work and extends it using U.S. auto industry data for 1958–80. Some problems are found with the original analysis. Particularly important is the finding that the substitution of random numbers for morale indicators in the translog econometric equations used by Norsworthy and Zabala yields levels of statistical significance comparable to, and in some trials even higher than, those found when morale indicators are used. Thus, the question of whether poor worker morale contributed to the slowdown in economic growth, this study concludes, is still unresolved.