Effects of unreasonable pay discrepancies for under- and overpayment on double demotivation

The "double demotivation" hypothesis that pay discrepancies decrease work motivation among both lower and higher paid groups was tested in two experiments. In experiment 1, 70 Australian undergraduates received either $1 or $2 to work on an intrinsically rewarding puzzle, with or without knowledge of what amount other participants were receiving. A comparison of participants with a no-payment control showed that participants exhibited significantly reduced intrinsic motivation (seconds spent interacting with the puzzle during a free-choice period) when they knew that they were being under- or overpaid. In experiment 2, 126 occupationally matched Australian workers receiving wages equal to, lower than, or higher than those of counterparts reported their level of job satisfaction and whether they would stay on the job, change jobs, or retire, if given the financial opportunity. Compared with equitably paid workers, employees who felt they were being under- or overpaid reported lower job satisfaction and greater readiness to change jobs. The results provide experimental support for double demotivation, which is relevant not only to international development cooperation but also to Western enterprise bargaining, merit pay, and minority groups in the multicultural workplace.