We all know it: Money makes the world go round. Yet ironically, it's a business faux pas for both employers and job seekers to admit this. In a new, bold move to attract top talent, Microsoft Corp. isn't beating around the bush: Come work for us, and you'll be earning $163,000 as a 22-year-old fresh out of college.

For a business leader, being so explicit about compensation might be concerning. Doesn't this mean you'll attract those just in it for the money, those without real interest in the organization or passion for the job? Economics research tells us this is false. 

Financial incentives are a powerful motivator, and they can allow for more committed and loyal employees, not in spite of the money but because of it. Psychology research tells us why.

Money helps tell a person's story

Thanks to the cognitive revolution, humans have a narrative bias. This means we make sense of our world by telling ourselves stories. Money is one such story. Beyond its numerical value, money allows us to dream into being the story we believe our lives can be. Sounds obvious, but meaning making is what we crave -- and top talent is no exception. 

Added to this instinct is the link between intelligence and creativity. Clever talent may be naturally more creative with their storytelling, imaginations, and ambitions -- and they'll want to stretch those muscles. 

Not only does Microsoft give them a playground on which to do this, but -- because it's targeting fresh graduates -- it's also likely their first experience with this kind of employer pay. Given what we know about the anchoring effect, Microsoft is setting itself up for a future of loyal, intelligent employees who are hooked right from the get-go. A winning formula. 

Money makes people feel safe and secure

Our most basic instinct is our survival instinct. In any endeavor, we assess our environments for immediate and future threats. In our day-to-day lives, this might mean inaccessibility to rent, health care, and family support.

In this survival mode, we are less cerebral, less imaginative, and less productive. Our cortisol levels are higher. We feel more stressed and more on edge. And prolonged periods of this lead to the deterioration of our appetites, sleep patterns, and mental health. 

If your employees feel this way, your business will suffer. Their productivity will tank, and they'll eventually leave your business for greener pastures. This will cause instability within your company and be costlier in the long term. The solution? Put simply, better compensation.

Money triggers a reciprocity bias 

Historically, humans have built their communities on bargaining. Agreements within tit-for- tat cultures establish informal accountability between strangers within a community. This accountability thrives on a mix of the human fear of social isolation and the fear of being branded an uncooperative member of the group.

What does this mean for your business? It means that, at the end of the day, your employees are in the business of reputation management. You kept your end of the bargain by offering high compensation, and now it's their turn. They'll start to feel more accountability over their work, show more initiative in getting it done, and are more likely to align with your business's status quo -- lest they gain a negative reputation. 

The result? Engaged, productive, and loyal employees.