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Setting limits: Ethical thresholds to the CEO-worker pay gap.

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People accept a threshold of wage inequality, with a maximum acceptable pay gap differing from the ideal. Men generally tolerate greater wage inequality than women.

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Area of Science:

  • Social Psychology
  • Behavioral Economics
  • Economic Inequality

Background:

  • Wage inequality acceptance is debated, balancing fairness and incentives.
  • Prior research focused on ideal inequality, not acceptance thresholds.
  • Understanding public perception of economic disparities is crucial.

Purpose of the Study:

  • To test the hypothesis of a threshold for wage inequality acceptance.
  • To differentiate between ideal and maximum acceptable pay gaps.
  • To explore gender differences in wage inequality tolerance.

Main Methods:

  • Two correlational and one preregistered experimental study.
  • Participants (Ntotal = 664) indicated ideal and maximum acceptable CEO pay gaps relative to worker wages.
  • Analysis of stated pay gap preferences.

Main Results:

  • Individuals reported higher maximum acceptable pay gaps than ideal pay gaps.
  • Evidence suggests a minimum necessary degree of wage inequality.
  • Men consistently preferred and tolerated greater wage inequality than women.

Conclusions:

  • Findings support the existence of a wage inequality acceptance threshold.
  • This research opens avenues for studying the cognitive and motivational bases of economic inequality attitudes.
  • Gender significantly influences perceptions and tolerance of wage disparities.