Determinants of just earnings: The importance of comparisons with similar others and social relations with supervisors and coworkers in organizations

Abstract

Despite the well-known consequences of perceived injustice of earnings for individuals and organizations, little research that explores the determinants of just earnings in organizations exists. This paper investigates what employees think they deserve as just earnings and why. We argue that comparisons with others in the organization allow employees to evaluate the fairness of their rewards. Moreover, social relations with supervisors and coworkers indirectly affect just earnings, as they can be beneficial or burdensome. The analyses are based on unique linked employer-employee (LEE) data on more than 1300 respondents surveyed in Germany in 2012/13. The results show that employees justify earnings not only by individual inputs but also by comparisons to coworkers. When people with similar characteristics who work in the same organization earn more, employees think they deserve more, too. Furthermore, employees with poor social relations with their supervisors and their coworkers at the workplace think they should receive higher fair earnings. These findings support the view that, besides economic factors, the comparisons and social relations within organizations are determinants of what people think they deserve as just earnings.