High pay seen as sign of competence, study finds

Given a choice, people prefer to collaborate on work projects with higher-paid colleagues, but they are willing to hire subordinates with lower pay histories than themselves, according to a study published in the journal American psychologist.

The study aimed to investigate how a trend toward greater pay transparency in the business world may affect worker behavior.

“I’ve long been interested in how small—and not-so-small—differences in wages can generate strong reactions from people,” said Kevin Kniffin, Ph.D., assistant professor at Cornell University and co-author of the study.

“When you add to this the trend toward greater pay transparency in organizations, whether required by law or requested by employees, and the trend toward more teamwork and collaboration at work, it becomes increasingly valuable to better understand how people perceive pay differences relative to their colleagues and potential collaborators.”

Some researchers have speculated that pay transparency might lead employees to distrust higher-paid colleagues and avoid working with them. But Kniffin and his colleague Angus Hildreth, Ph.D., suspect that may not be the case and that people might instead use pay as a signal to decide which colleagues are more competent.

To explore this question, they conducted three experiments in which they gave participants hypothetical information about their colleagues’ salaries and asked them who they would prefer to work with on a project.

In the first experiment, they subjected 171 PhD students in economics to a hypothetical situation in which the students could apply to work on a project and choose a partner to work with, also knowing the offers of their potential partners. Nearly two-thirds (65%) applied to work with the person who asked for the highest salary.

In the second experiment, 171 online participants were given a similar scenario in which they could choose to work with a higher- or lower-paid colleague.

At first, nearly three-quarters (73%) of participants chose to work with the higher-paid colleague. However, the researchers then provided participants with additional information that both colleagues had the same knowledge, skills, abilities, and experience as the participant. Subsequently, the percentage of participants preferring to work with the higher-paid colleague decreased significantly, to 60%.

In a third experiment, 375 online participants were asked to name four real-life coworkers, two with whom they had worked before and two with whom they had never worked. Participants were then asked to imagine that one member of each pair had a higher salary than they did, and that one member of each pair had a lower salary.

Again, when asked to choose a partner for a project, the majority of participants chose the colleague with the higher salary. However, the difference was smaller than in the purely hypothetical experiments: in this case, when participants had to choose between two colleagues with whom they had worked before, 58% chose the higher-paid colleague.

“People seem to think that higher pay is deserved and reflects greater competence. And they seem to think that collaborating with someone who has a higher salary will be beneficial – in other words, that the higher-paid colleague will share some of his or her superior knowledge and skills with them,” Hildreth said.

Finally, in a fourth experiment, the researchers studied the impact of salary history on hiring decisions. They asked 138 online participants, all with hiring experience, to choose between two candidates with similar knowledge, skills, and experience.

All things being equal, 71% of participants preferred to hire a candidate whose salary history was lower than their own. This may reflect a belief that salary differences should correspond to organizational rank, the researchers suggest.

Overall, the research has implications for workplaces as pay transparency increases, Kniffin said.

“While companies may anticipate that pay transparency would hamper employees’ willingness to work with higher-paid colleagues, we find that pay disparities can actually act as a magnet for collaboration,” he said.

Hildreth says future research could examine how these collaborative decisions translate into the real world. “I’m intrigued to know whether people actually benefit from collaborating with their higher-paid peers, and whether higher-paid workers share their supposedly superior skills,” he said.