Does Knowing Other Workers’ Wage Level Promote Employees’ Pay Fairness Perception? Evidence From a Randomized Survey Experiment

• Author: Kwang Bin Bae,Hosung Sohn,Il Hyeong Cho,Dongsook Han
• DOI: http://doi.org/10.1177/00910260221098191
• Published date: 01 December 2022
• Date: 01 December 2022
• Subject Matter: Articles

https://doi.org/10.1177/00910260221098191

Public Personnel Management

2022, Vol. 51(4) 407 –429

© The Author(s) 2022

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DOI: 10.1177/00910260221098191

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Article

Does Knowing Other

Workers’ Wage Level

Promote Employees’ Pay

Fairness Perception? Evidence

From a Randomized Survey

Experiment

Kwang Bin Bae1, Hosung Sohn2,

Il Hyeong Cho3, and Dongsook Han4

Abstract

Pay fairness perception is considered a significant determinant of employee turnover.

This study analyzes whether public-sector employees’ pay fairness perception is

promoted when workers are notified of the wage level of similar employees working

in other sectors (i.e., relative wage). A randomized survey experiment was conducted

to test the hypothesis that relative wages matter for pay fairness perception. The

results show that informing employees of other workers’ wage levels enhances pay

fairness perception. The subgroup analysis shows that the effect is more pronounced

for employees who are relatively early in their career. The results imply that

providing information on relative wage can be an effective way of promoting pay

fairness perception, thereby reducing worker turnover and contributing potentially

to productivity gains in public-sector organizations where turnover rate is salient.

Keywords

pay fairness perception, randomized survey experiment, relative wage, information

disclosure

1Dongguk University, Jung-gu, Seoul, South Korea

2Chung-Ang University, Seoul, South Korea

3Korea Cultural Heritage Policy Institute, Seoul, Republic of Korea

4Korea Institute of Public Finance, Yeongi-gun, South Korea

Corresponding Author:

Hosung Sohn, School of Public Service, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul,

06974, South Korea.

Email: sohnhosung@gmail.com

1098191PPMXXX10.1177/00910260221098191Public Personnel ManagementBae et al.

research-article2022

408 Public Personnel Management 51(4)

Introduction

Many studies have demonstrated that worker turnover is a significant determinant of

organizational performance (e.g., Hancock et al., 2013; Park & Shaw, 2013; Shaw,

2011), and the relationship between the two variables has been found to be an inverted

U-shape (Glebbeek & Bax, 2004; Meier & Hicklin, 2008). Reducing employee turn-

over is therefore an important managerial goal for human resources in the public sec-

tor, in particular, because continuity and consistency in public service delivery is

critical (van Engen et al., 2019). Given the importance of worker turnover for public-

sector organizational performance, many scholars in public administration have

engaged in identifying the factors influencing employee turnover (e.g., Bertelli, 2007;

Grissom et al., 2016; Pitts et al., 2011).

One significant factor presented by previous literature that affects worker turnover

is employees’ pay fairness perception and satisfaction (Hom et al., 2019). Employee

satisfaction with pay level can increase their commitment to their jobs and discourage

turnover (Currall et al., 2005; Greenberg, 1990; Singh & Loncar, 2010), as can easily

be confirmed theoretically by Blau’s (1964) social exchange theory and Gouldner’s

(1960) norm of reciprocity theory. Many studies also demonstrate that a core determi-

nant of worker retention is whether employees perceive their pay as fair (e.g., Hassan,

2012; Mohrenweiser & Pfeifer, 2019; Moon, 2017; Simons & Roberson, 2003). This

hypothesis is driven mainly by Adams’ (1963) social equity theory, which argues that

social comparison is important for employees who care about whether they are treated

similarly to others like them in the organization.

Given that pay fairness perception and satisfaction are significant drivers of

employee turnover, which in turn, affects organizational performance, research iden-

tifying the factors determining pay fairness perception and satisfaction and the rela-

tive magnitude of the effect of each factor is desirable for human resource management

practices. Note, however, that while many studies have analyzed the effect of pay

fairness perception and satisfaction on worker turnover, few studies to date have

engaged in identifying the causal factors that influence pay fairness perception and

satisfaction.

This study fills this gap in the public administration literature by analyzing whether

information on relative wage affects employees’ pay fairness perception. More spe-

cifically, this study examines the hypothesis that employees’ pay fairness perception is

promoted to a certain extent if they are acquainted with the wage level of others in a

similar position to theirs. As can be hypothesized from equity theory in social psychol-

ogy and social exchange theory in sociology, relative or competitive wage is an impor-

tant determinant of many labor-related outcomes. As such, many studies have analyzed

the impact of relative wage on outcomes such as unemployment (Akerlof & Yellen,

1990), effort (Charness & Kuhn, 2007), satisfaction (Clark & Oswald, 1996), and

turnover (Llorens & Stazyk, 2011). Note, however, that very few studies have exam-

ined the relationship between relative wage and pay fairness perception.

Moreover, most studies have analyzed the effect of competitive wage itself.

Therefore, this study is unique in that it analyzes the effect on pay fairness perception