In a study of nearly 20,000 employees at public universities, researchers have found that workers are more concerned about whether their compensation is fair based on the work they're doing, rather than simply whether they earn more or less than their peers.
The findings, published in the Strategic Management Society's Strategic Management Journal , diminish some companies' concerns that going public with salary information could lead to a decline in aggregate productivity. Instead, the authors discovered that small shifts in work output are highly individualized, and they may reflect workers' responses to how closely they feel their efforts align with the pay they receive.
"Our results suggest that individuals primarily responded to wage inequity rather than inequality," said study coauthor Tomasz Obloj, PhD, an associate professor and Weimer Faculty Fellow at Indiana University's Kelley School of Business. "By inequity, we mean unfairness in how pay reflects performance, not just differences in pay levels."
The investigators examined the productivity of faculty at 116 institutions across eight U.S. states, for which salary information was made public via online news articles, think tanks, and state agency websites. They measured how work output changed once salary information went public.
They found that workers who learned they were 'underpaid' in comparison with their peers tended to respond with a slight decrease in output. Meanwhile, 'overpaid' workers appeared to start working harder, increasing their productivity by a rate of 5 to 13 percent.
"Employees who found they were paid more than their performance warranted increased their productivity, likely to justify their elevated compensation," observed lead author Cédric Gutierrez, PhD, an assistant professor in the Department of Management and Technology at Bocconi University in Milan, Italy.
Studying workers in academia allowed the authors to measure publicly available performance data in the form of academic achievements. They generated a productivity index by aggregating the individuals' published academic articles, academic awards, and published books or book chapters.
While they couldn't capture metrics such as teaching performance or institutional service, the data they collected represented the output that research-focused institutions are likely to rely on when they evaluate productivity for tenure-track faculty, Dr. Obloj explained.
The study is one of the first to investigate the effects of pay transparency in the field, rather than in an experimental setting. The authors said they hope that transparency practices will not only continue to illuminate inequities, but that it will also serve as a catalyst for positive changes that will in turn generate better productivity.
"An initial productivity response may reflect what each employee discovers about how they are treated," Dr. Gutierrez said. "But if, in response to the transparency, the pay structure changes, those initial productivity responses may dissipate as inequities are addressed."
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