The Effects of Pay Differential on Social Undermining and Performance via Envy

Abstract

Taking the self-evaluation maintenance model (Tesser, 1988) perspective, we develop a self-based model of pay differential effects. In this model, we show how emotion, specifically envy emotion, plays a role in pay differential effects on both positive (i.e., work effort and job performance) and negative (i.e., social undermining) outcomes. We argue that a large pay differential triggers a lower paid employee to experience envy, which in turn leads to both social undermining and performance behaviors. In addition, we also posit that the indirect effect of a pay differential on social undermining is moderated by an employee’s self-esteem. Using Taiwanese employee data of 614 dyads nested within 186 members of 46 teams, we found that, through envy, a pay differential positively affects social undermining, and the mediated relationship is weakened when an employee’s self-esteem is high. The theoretical and empirical implications are discussed.