Abstract
This paper investigates justice perceptions of employees towards their own earnings. Earnings are decomposed into three components: (1) In returns based on human capital endowments, (2) in returns based on individual residual differences and (3) in returns based on differences between occupations. The legitimacy of these earnings components is measured via the justice assessments of employees. Based on theoretical models from justice research and class theory it is hypothesized that earnings inequality resulting from human capital factors is evaluated as just, whereas residual inequality and occupational inequality are perceived as unjust. The hypotheses are tested by using data from a German longitudinal panel study (SOEP) of the years 2005 to 2011. These data allow studying changes of individual earnings and justice evaluations in a household panel over the time span of six years (with four biennial measurement points). The findings support our hypotheses indicating that losses or gains in earnings which are due to changes in human capital endowments do not affect justice perceptions of own earnings. Losses or gains stemming from changes of a person's earnings position within the occupational group or the position of a person's occupational group within the earnings hierarchy of a society, however, affect justice perceptions remarkably. Thus, we can show that justice evaluations of own earnings do not solely depend on compensation for individual investments but also on residual differences in earnings within and between occupational groups.
Highlights
Following Mouw and Kalleberg (2010) three types of earnings inequalities can at least be distinguished in modern societies: (1) Inequality due to individual differences in human capital endowments, (2) residual inequality within occupations—the share that is not due to individual differences in human capital, and (3) occupational inequality—differences in earnings between occupations that can for instance be attributed to specific processes of social closure
The aim of this paper was to investigate the importance of three types of earnings inequalities for the justice perception of earnings by extending the standardmodel of justice evaluation with a structural concept from class theory
As the standardmodel relies solely on comparison processes at the individual level it provides no theoretical proposition on comparison standards
Summary
Following Mouw and Kalleberg (2010) three types of earnings inequalities can at least be distinguished in modern societies: (1) Inequality due to individual differences in human capital endowments, (2) residual inequality within occupations—the share that is not due to individual differences in human capital, and (3) occupational inequality—differences in earnings between occupations that can for instance be attributed to specific processes of social closure. Studies on the relative proportions of these three components show that human capital characteristics have lost relevance (Gartner and Hinz 2009) while residual factors within occupations (Kim & Sakamoto 2008) and differences between occupations (Mouw and Kalleberg 2010) have become more important for explaining earnings inequalities over the last twenty years Against this background the question of the present paper is whether these components of earnings inequalities affect employees’ perceptions of justice towards their own earnings, or in other words we ask if individuals take earnings inequalities that are not due to individual investments into account when they evaluate the fairness of their own earnings. The theories, give no hints with whom employees compare themselves, or in other words, what their reference standards are
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