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- Title
THE MORALE EFFECTS OF PAY INEQUALITY.
- Authors
Breza, Emily; Kaur, Supreet; Shamdasani, Yogita
- Abstract
Relative-pay concerns have potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether coworkers within production units receive the same flat daily wage or differential wages according to their (baseline) productivity ranks. When coworkers' productivity is difficult to observe, pay inequality reduces output by 0.45 standard deviations and attendance by 18 percentage points. It also lowers coworkers' ability to cooperate in their own self-interest. However, when workers can clearly perceive that their higher-paid peers are more productive than themselves, pay disparity has no discernible effect on output, attendance, or group cohesion. These findings help inform our understanding of when pay compression is more likely to arise in the labor market.
- Subjects
INDIA; WAGE differentials; MORALE; LABOR market; MANUFACTURING industries; WAGES; LABOR productivity
- Publication
Quarterly Journal of Economics, 2018, Vol 133, Issue 2, p611
- ISSN
0033-5533
- Publication type
Article
- DOI
10.1093/qje/qjx041