Pay inequality in organizations shapes pay-based stereotypes

There is some evidence that organizations with higher pay inequality have more problematic social dynamics. The present research examines whether pay inequality introduces pay-based intergroup dynamics and shapes the stereotypes of the highest- and lowest-paid employees in the workplace. In two studies (a cross-sectional survey N = 413, and an experiment N = 286), we found that greater pay inequality (actual or perceived) strengthened perceptions that the highest-paid employees were assertive and the lowest-paid were not. Indirect effects analysis suggested that this could be due, in part, to the increased tendency to perceive the highest and lowest-paid employees as distinct social groups. We also found that greater pay inequality strengthened perceptions that the highest-paid (but not the lowest-paid) employees were immoral and unfriendly. Indirect effects analysis suggested this could be due, in part, to the increased tendency to assume that the highest and lowest-paid employees have negative relations. Together, our research suggests that pay inequality shapes the dynamics and stereotypes of pay-based groups in ways that could undermine organizational functioning.