The Effect of Pay Transparency on Narcissists: Can Personality Type Predict Reciprocity?

• In Event: 5.04 Personality Trait

Abstract

Government regulations and popular media push companies to be more transparent about employee wage information. Yet, companies often attempt to keep salary information secret because, when wage dispersion exists, transparency decreases total employee productivity. The fair-wage effort hypothesis (FWEH) models this phenomenon (Akerlof and Yellen 1990). Productivity decreases because, on average, when employees learn they are paid less than others, they engage in negative reciprocity, lowering their productivity. At the same time, on average, employees who learn they are paid more than others do not engage in positive reciprocity. I investigate whether narcissism can predict individual employees’ reciprocal responses after they learn they are being paid more or less than their coworkers. Narcissists may feel more entitled to rewards and may be more likely to seek revenge for perceived injustices than nonnarcissists. I test the hypotheses using an experiment on Amazon Mechanical Turk in which I manipulate pay level and transparency. I find that the FWEH accurately describes average behavior. However, narcissism moderates the strength of individual employees’ reciprocal responses, increasing the magnitude of negative reciprocity and decreasing the magnitude of positive reciprocity.

Author

• Lisa LaViers, Emory University