Events

Speaker:

Ms. Yuna Cho
Ph.D., Management
Yale University

Abstract:

Both organizations and governments have increasingly attended to raising levels of minimum pay for employed individuals, with the aim of improving employee well-being. The current research examines how raising organizational minimum pay affects employee happiness and highlights an individual’s income position within the organization as a critical moderator of the reaction to pay changes. Though social comparison theory usually assumes a single criterion on which individuals make comparisons, we argue that changes in reward structures prompt employees to engage in social comparisons across two dimensions that are made salient through the change. We show that employees in the middle of the pay curve face unfavorable comparisons on both their relative standing in the organization (“positional salience”) and the amount of pay increase they receive in comparison with increases received by others (“magnitude salience”), and exhibit a negative reaction compared to those at the top or the bottom of the pay curve. We investigate this pattern of “middle status dejection” across two studies, a field study exploiting an organizational quasi-experiment and a lab experiment. Perceived respect by the organization (or lack thereof) mediates the relationship between pay changes and employee happiness. This study contributes to the literature on employee well-being and the paradoxical outcomes that organizational policies can trigger, advancing social comparison theory to integrate contexts of social change rather than static snapshots.