Pay inequality in organizations shapes pay‐based stereotypes

Abstract

AbstractThere is some evidence that organizations with higher pay inequality have more problematic social dynamics. The present research examines whether pay inequality introduces pay‐based intergroup dynamics and shapes the stereotypes of the highest‐ and lowest‐paid employees in the workplace. In two studies (a cross‐sectional survey N = 413, and an experiment N = 286), we found that greater pay inequality (actual or perceived) strengthened perceptions that the highest‐paid employees were assertive and the lowest‐paid were not. Indirect effects analysis suggested that this could be due, in part, to the increased tendency to perceive the highest and lowest‐paid employees as distinct social groups. We also found that greater pay inequality strengthened perceptions that the highest‐paid (but not the lowest‐paid) employees were immoral and unfriendly. Indirect effects analysis suggested this could be due, in part, to the increased tendency to assume that the highest and lowest‐paid employees have negative relations. Together, our research suggests that pay inequality shapes the dynamics and stereotypes of pay‐based groups in ways that could undermine organizational functioning.