Does Knowing Other Workers' Wage Level Promote Employees' Pay Fairness Perception? Evidence From a Randomized Survey Experiment

Abstract

Pay fairness perception is considered a significant determinant of employee turnover. This study analyzes whether public-sector employees' pay fairness perception is promoted when workers are notified of the wage level of similar employees working in other sectors (i.e., relative wage). A randomized survey experiment was conducted to test the hypothesis that relative wages matter for pay fairness perception. The results show that informing employees of other workers' wage levels enhances pay fairness perception. The subgroup analysis shows that the effect is more pronounced for employees who are relatively early in their career. The results imply that providing information on relative wage can be an effective way of promoting pay fairness perception, thereby reducing worker turnover and contributing potentially to productivity gains in public-sector organizations where turnover rate is salient.