The role of relevant others in the determination of fair pay

Abstract

Although scholars may disagree about the effectiveness of using money to motivate workers, few would deny the deleterious effects caused by employee perceptions of underpayment. Yet little is known about the process(es) through which individuals determine whether or not their pay is fair. Indeed, knowledge in this area largely is limited to the awareness that fair pay is a relative concept. That is, individuals judge the equity of pay not from the absolute size of the wage, but rather through comparisons of their wages to those of other people. In addition, pay referents such as the cost of living, also are used to evaluate pay. This use of relevant others is known as the social comparison process.

This study investigated the relationship between certain attitudinal and job-related characteristics of 206 individuals, and their reactions to 18 different pay comparisons. It was determined that respondents' attitudes toward the organization's wage distribution rule, level of aspiration, desire for external movement (to other employers), and social interaction were related to the way individuals view these comparisons. A structural variable--job tenure--was not found to have a statistically significant association with the social comparison process.

Unlike the six previous studies of this issue, this analysis was framed within the context of a theoretical model. Specifically, Goodman's two-stage model for the selection of pay referents was used to generate the variables of interest, the subsequent research hypotheses, and as a backdrop against which the results of the analysis could be interpreted.

Perhaps the most significant result of this study was finding rather marked temporal stability of pay comparisons. Test-retest analyses showed that over a 3-month period only 5 of 54 pay comparisons demonstrated a statistically significant change in terms of the frequency with which they were reportedly made, the importance ascribed to each comparison, or in terms of the satisfaction felt with each comparison. Finding this element of stability suggests that equity theory may have been prematurely abandoned as a research paradigm.