The Impact of Pay Differential Perception on Employee Job Attitudes

Abstract

Social comparison theory suggests that employees tend to compare themselves with others in and out of the company they work for. This paper examines employee pay differential perception across industries and companies. We divide pay differential perception into three types: internal vertical perception, internal horizontal perception, and external perception. We investigate how these three types of pay differential perception are related to the two dimensions of employee job attitudes: cognitive affection dimension that includes job satisfaction and affective commitment, and behavioral intention dimension that includes turnover intention, interpersonal helping intention and discretionary effort intention. Furthermore, based on social exchange theory, we investigate how perceived organizational support moderates the relationship between employee pay differential perception and job attitudes. We collected survey data from four classes of part-time master’s and MBA students enrolling in a university campus in south China during 2012-2014, with a total valid sample of 137 responses. Through multiple regression analysis, we found that (1) internal vertical pay differential perception is weakly negatively associated with job attitudes; (2) internal horizontal pay differential perception is significantly negatively associated with job attitudes; (3) external pay differential perception is significantly negatively associated with job attitudes; (4) in comparison, vertical pay differential perception is less significantly related to job attitudes than horizontal pay differential perception. Perceived organizational support positively moderates some of the negative relationships between pay differential perception and job attitudes.