The issue of fair pay differs across contexts, but a new study provides a snapshot of how it works.
The two main factors that typically impact fair pay are the markets – with the rise and fall of supply and demand – and employee needs. However, the decisions of managers when assessing wages may also impact fair pay.
To investigate this, researchers from the Karlsruhe Institute of Technology grouped 500 people into “assemblers” and “managers.”
The assemblers took on the role of workers who screwed 100 ballpoint pens together and apart, which is a nerve-racking and tedious activity that lasted more than an hour.
The people who were assigned as managers determined the appropriate salary for the labour. They could give out wages of up to 21 euros. Several of the managers were given the chance to keep the rest of the 21 euros for themselves. For the others, the rest of the money was returned to the research pot.
The study revealed that managers would set aside the 21 euros for themselves if they could. In such a scenario of self-interest, about 7.59 euros on average were paid to assemblers by the managers.
On the other hand, when the possibility of self-interest was removed, managers would set as much as 11.10 euros as pay for the assemblers, a 4.6% difference from the previous pay.
The research also revealed that female managers paid more fairly. If they could save the rest of the 21 euros for themselves, female managers set 8.54 euros as the salary of the assemblers. If the remaining part of the 21 euros were returned to the research pot, female managers gave out 9.44 euros to assemblers.
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Professor Nora Szech, one of the researchers, explained that the work experience, incentive system, and gender of managers all influence the wages that they set for employees. She said female managers tended to make more selfless decisions than did male managers.
The study emphasises how diversity in executive ranks, particularly in the C-Suite, is vital to companies aiming to promote wage equality.