Equity (or inequity) is a psychological state residing within an individual. IN equity perceptions create a feeling of dissonance that the individual attempts to resolve in some manner.
Equity is a social comparison process, resulting when individuals compare their pay to the pay of others. There is no "rational" or single "equitable pay rate" for any given job or individual. Equity is a subjective evaluation, not an objective one. Based on the comparison that individuals use, each individual is likely to develop different perceptions of equity.
The comparisons individuals use tend to fall into five classes of comparison:
- Job Equity- Individuals compare their pay to the pay of other individuals in the same position they hold within their organization. (@URI- Department Equity, e.g., chemistry professors camping to other chemistry professors)
- Company Equity- Individuals compare their pay to the pay of other individuals holding the different positions within their organization (@URI- University Equity, e.g., art professors comparing to accounting professors).
- Occupational (Market) Equity- Individuals compare their pay to the pay of other individuals holding the same position in other organizations (@URI- Market Equity. e.g., economics professors are URI comparing to economics professors at UCONN)
- Cohort Equity- Individuals compare their pay to the pay of others in similar cohort groups, generally age and education.
- Self Equity- Individuals compare their pay to the pay they received at another point in time.
Individuals determine equity by comparing their contributions (job inputs) and their rewards (job outcomes) to those of the their comparisons. This comparison takes the form of the following ratio:
When this ratio is in balance, the individual perceives equity. Inequity is experienced when the ratio is out of balance. Thus when the individual perceives that his or her contribution are equal to the comparison and his or her rewards are lower, or his or her contributions are greater and rewards are equal, inequity is felt.
The individual responses to inequity include:
- Leaving the organization
- Reduction in performance, generally extra role behavior
- Attempting to increase one’s pay
- Attempting to increase the performance of others- Generally through peer pressure
- Rationalization- perceptually altering reward and/or contributions.
What do individuals view as relevant contributions? Given the perceptual nature of equity, the answer varies with each individual, however, contributions fall into a number of categories:
- Job contributions include the factors that differentiate on job from another. They typically include responsibility, effect, skills, education, and working conditions required by the job itself. (e.g., Individuals working in jobs requiring greater levels of responsibility generally expect higher levels of pay).
- Personal contributions include attributes the individuals bring to the organization that they believe differentiate them from others such as experience, longevity, and extra education. (e.g., Individuals with greater seniority often expect higher levels of pay).
- Performance contributions include the extra effort and results that differentiate one employee from another. (e.g., Individuals who perceive that their performance is better than others with whom they work, often believe they are entitled to higher levels of pay.)
Typical Management Interests: Managers generally define pay-related problems in terms of their behavioral consequences (turnover or performance). Therefore, inequity itself is not generally viewed as a management problem unless it appears to be related to turnover of reduced performance. Since the links between turnover and pay are often much clearer than those between pay and extra role behavior, turnover often becomes the only managerial focus. Therefore, typical management interests relate to keeping the employees who it deems valuable.
Typical Employee Interest: From the employee perspective, the perception of inequity is a problem in itself. A union’s interest lies in achieving equity for the greatest number of its members, regardless of their ability to leave the organization. In fact, it is a union’s responsibility to bargain for the interest of those with limited individual power or marketability. Low morale is often a consequence of inequity. Even when low morale is not manifested in turnover, reduced performance, to reluctance to take on extra duties, from the employee perspective, it is still viewed as a problem. A union’s interest generally include improve Quality of Work Life (QWL) independent of its direct affect on organizational membership or organizational performance.
From the perspective of interest based bargaining we should be attempting to develop solutions that meet the interests of both parties. What we must decide is how to resolve issues in which the limits to our creatively do not allow us to satisfy both sets interests entirely.