A contingent view of reactions to objective pay conditions: interdependence among pay structure characteristics and pay relative to internal and external referents

The authors studied the general proposition that because social comparisons are so central to how people react to pay, the effect of an important pay condition likely depends on a social pay comparison that is relevant to that condition. To investigate this, the authors used actual pay data on more than 2,000 public school teachers across more than 400 school districts and tested whether pay equity perceptions resulted from interactions among objective measures of structural (pay dispersion, entry-level pay, pay range maximum, external competitiveness) and individual (pay relative to internal referents, pay relative to external referents) pay conditions. Cross-level interactions indicated that pay relative to internal referents moderated how pay structure conditions related to pay equity perceptions. Additionally, within-level interactions indicated that the effect of employee standing in the external pay hierarchy depended on where one stood in the internal pay hierarchy; this dynamic emerged both for individual-level measures of current standing and for organization-level measures that suggested future standing.