Effects of Internal and External Pay Comparisons on Work Attitudes¹

Abstract

The effects of internal and external pay comparisons on several work attitudes were assessed within an experimental design. Participants responded to hypothetical scenarios in which their pay was greater, less, or equal to an internal and external individual or group referent. As predicted, internal and external pay comparisons predicted pay satisfaction and perceived pay fairness. Also as expected, internal equity was the stronger predictor of work motivation and perceived organizational support, and external equity predicted turnover intention more strongly. Partial support was found for the hypothesis that work attitudes would be impacted more strongly when individuals made pay comparisons with a group referent than with an individual referent other. Implications for the design of compensation systems are discussed.