Forget wage differences, it's equal pay that makes people furious

   
   
17 Dec 2009 13:31:00.000

PA 325/09

The average worker is more likely to resent his colleague if both are earning the same wage, economists have revealed.

 

Conventional wisdom suggests jealousy and friction in the workplace develop when one employee is paid more than another. But a University of Nottingham study has shown equal pay actually causes more problems — because it infuriates the hardest-working members of staff.

 

They feel so aggrieved that colleagues who put in less effort are getting the same amount that they eventually slack off themselves. The situation breeds more envy and lower morale than one in which individuals enjoy different levels of pay, say economists.

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Researchers from The University of Nottingham’s School of Economics and the University of Bonn carried out the study.

They found the “equity norm” — the idea that an employee “gets out what he puts in” — is important to workers but is often violated in an equal-pay situation. Nottingham research fellow and study co-author Dr Johannes Abeler said the findings proved equality can sometimes be unfair.

He said: “Equal pay is often referred to as a cornerstone of a fair wage scheme and is one of the most prevalent pay modes. But in a work environment the equity norm demands that a person who puts in more effort should receive a higher wage.

“In other words, if equity is important, the often-heard slogan ‘equal pay for equal work’ implies ‘unequal pay for unequal work’.”

Using a controlled laboratory experiment, Dr Abeler and his co-authors found workers who were paid individually put in almost twice as much effort as those who got the same pay. But those who put in more work yet remained on the same pay as lazier colleagues subsequently eased off themselves.

Dr Abeler said: “Hard workers get discouraged under equal pay and reduce their effort levels to those of low-performing colleagues. But under individual pay the high performers keep working hard — and the low performers change their behaviour and get better.”

Dr Abeler, an expert in behavioural economics, stressed there were still environments in which equal pay might make sense.

He said: “These results shouldn’t be interpreted as arguments against equality in general, but they do point to the limits of equal wages.

“Equal pay does have benefits — for example, it’s easier to implement than individual wages and can encourage collaboration. Equality is potentially a good choice in jobs where workers’ performance is difficult to measure or is due to random influences.

“But the benefits sometimes come at a cost, and it isn’t necessarily right to argue equal pay leads to less envy and higher morale.”

The Nottingham School of Economics, based at The University of Nottingham, is regarded as one of the UK’s leading research departments.

Its economists have advised organisations including the Department for Work and Pensions, the World Bank and the Bank of England.

The study can be downloaded at:

http://www.nottingham.ac.uk/economics/cedex/papers/2009-11.pdf

— Ends —

Notes to editors: The University of Nottingham is ranked in the UK's Top 10 and the World's Top 100 universities by the Shanghai Jiao Tong (SJTU) and the Times Higher Education-QS World University Rankings.

More than 90 per cent of research at The University of Nottingham is of international quality, according to RAE 2008, with almost 60 per cent of all research defined as ‘world-leading’ or ‘internationally excellent’. Research Fortnight analysis of RAE 2008 ranks the University 7th in the UK by research power. In 27 subject areas, the University features in the UK Top Ten, with 14 of those in the Top Five.

The University provides innovative and top quality teaching, undertakes world-changing research, and attracts talented staff and students from 150 nations. Described by The Times as Britain's “only truly global university”, it has invested continuously in award-winning campuses in the United Kingdom, China and Malaysia. Twice since 2003 its research and teaching academics have won Nobel Prizes. The University has won the Queen's Award for Enterprise in both 2006 (International Trade) and 2007 (Innovation – School of Pharmacy), and was named ‘Entrepreneurial University of the Year’ at the Times Higher Education Awards 2008.
 
Nottingham was designated as a Science City in 2005 in recognition of its rich scientific heritage, industrial base and role as a leading research centre. Nottingham has since embarked on a wide range of business, property, knowledge transfer and educational initiatives (www.science-city.co.uk) in order to build on its growing reputation as an international centre of scientific excellence. The University of Nottingham is a partner in Nottingham: the Science City.

Story credits

More information is available from Dr Johanes Abeler in the School of Economics, University of Nottingham, on +44 (0)115 951 5620, johanes.abeler@nottingham.ac.uk; Neil Robinson, Bulletin PR, on +44 (0)115 922 8264, neil.robinson@bulletinpr.co.uk

  Tim Utton

Tim Utton - Deputy Director of Communications

Email: tim.utton@nottingham.ac.uk Phone: +44 (0)115 846 8092 Location: University Park

Additional resources

Link to the study

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