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Journal of Applied Psychology Copyright 1990 by the American Psychological Association, Inc.

1990, Vol. 75, No. 4. 386-393 0021-9010/90/J00.75

Multiple Discrepancies and Pay Satisfaction

Robert W Rice and Suzanne M. Phillips


State University of New York at Buffalo

Dean B. McFarlin
Marquette University

In this study, a mail survey was used to measure pay satisfaction, current salary, 4 personal stan-
dards of comparison, and basic demographics for 169 mental health professionals. As predicted,
pay satisfaction was determined by the simultaneous appraisal of current salary against several
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personal standards of comparison. Explained variance in pay satisfaction rose from 26.1% when
This document is copyrighted by the American Psychological Association or one of its allied publishers.

only salary and demographics were used as predictors to 46.7% when discrepancy-related variables
associated with 4 standards of comparison also were used. Furthermore, R2 for the combined
discrepancy-related variables associated with all 4 standards of comparison was significantly
greater than R* for the discrepancy-related variables associated with any single standard. These
discrepancy effects took both additive and nonadditive forms. Discrepancy effects were stronger
when deserved salary or minimum salary was the standard of comparison than when other's salary
or average salary was.

Among the many properties characterizing work in formal employees who are paid exactly the same amount, there can be
organizations, pay is one of the most important. Most people substantial individual differences in terms of their personal
probably would not work in organizations if they were not paid. standards of comparison. Consequently, there can also be sub-
Furthermore, pay influences significant organizational behav- stantial individual differences in terms of the magnitude of the
ior variables such as absenteeism, union voting, and turnover discrepancies between such standards and their salaries. Given
(Heneman, 1985; Lawler, 1971; Shapiro & Wahba, 1978). The the possibility of such differences among employees receiving
importance of pay is reflected by the popularity of pay satisfac- the same salary, it is quite understandable that the literature has
tion as a research variable (see Heneman, 1985; and Lawler, consistently reported only a modest relationship between ac-
1971,1981, for reviews). tual salary and pay satisfaction. According to discrepancy the-
One of the most interesting findings from pay satisfaction ories, predictions of pay satisfaction would be more accurate if
research is the modest strength of the relationship between how they were based on discrepancies rather than on received salary
much people are actually paid and their satisfaction with pay. alone.
Although this relationship is consistently positive and statisti-
cally significant, actual salary generally accounts for less than Present Study
25% of the variance in pay satisfaction (Motowidlo, 1982,1983).
As summarized by Martin (1981, p. 57), empirical studies have The purpose of this study was to test the multiple discrepan-
shown that, in many cases, "greater rewards do not provide cies hypothesis. This hypothesis proposes that pay satisfaction
greater contentment." Those with the highest pay are not always is determined by an appraisal process in which actual salary is
the most satisfied with their pay. compared simultaneously with several standards of compari-
son. We can derive such a hypothesis from any of several con-
temporary versions of discrepancy theory (e.g, Crosby, 1982;
Discrepancy Theories of Satisfaction
Goodman, 1974; Heneman, 1985; Lawler, 1971; Locke, 1976;
By introducing the concept of a "personal standard of com- Michalos, 1985). Discrepancy theorists differ in terms of the
parison," discrepancy theories of pay satisfaction can explain specific standards they choose to include in their particular
the modest strength of the relationship between actual salary versions of discrepancy theory. In this study, we did not focus
and pay satisfaction (e.g., Goodman, 1974; Heneman, 1985; on a particular set of standards identified by any single version
Lawler, 1971). According to such theories, individual employ- of discrepancy theory; hence, the study does not test any partic-
ees compare their actual salary against one or more personal ular version of the multiple discrepancies hypothesis. Rather,
standards of comparison, such as what they deserve, want, or we tested a generic statement of the multiple discrepancies hy-
see others receiving. Pay satisfaction is determined by the dis- pothesis as it applies to predicting and explaining pay satisfac-
crepancy between actual salary and these standards. Among tion.
In our test of the multiple discrepancies hypothesis, we con-
sidered four standards of comparison: (a) the pay that employ-
Correspondence concerning this article should be addressed to Rob- ees feel they should receive (deserved salary); (b) the pay re-
ert W Rice, Department of Psychology, Park Hall, State University of ceived by others in the employees' own organizations (other's
New York at Buffalo, Amherst, New York 14260. salary); (c) the pay received by others doing similar work in

386
MULTIPLE DISCREPANCIES AND PAY SATISFACTION 387

other organizations located in the same geographic region verse of all standards that are relevant to pay satisfaction. We
(average salary); and (d) the minimum pay for which employees did not, therefore, test a multiple discrepancy model of pay
would be willing to perform their work (minimum salary). satisfaction in this study Our goal was more modest. We simply
There are good reasons for predicting that discrepancies involv- tested the hypothesis that these four standards of comparison,
ing each of these four standards of comparison are relevant to even though chosen somewhat arbitrarily, would demonstrate
pay satisfaction. that multiple discrepancies have a simultaneous influence on
pay satisfaction. Although research and theory does suggest
that discrepancies involving each of the four standards are
Deserved Salary
likely to influence pay satisfaction, the literature is silent with
Lawler (1971) and Heneman (19 8 5) are explicit in stating that regard to the simultaneous influence that multiple discrepan-
pay satisfaction is directly determined by a comparison be- cies involving these four standards might have.
tween current salary and the salary employees believe they On intuitive grounds, it may seem obvious that pay satisfac-
should receive for their jobs. Within their models, the salary tion is based on the simultaneous consideration of more than
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employees believe they should receive mediates the effects that one standard of comparison. To the best of our knowledge,
This document is copyrighted by the American Psychological Association or one of its allied publishers.

any other standards of comparison may have on pay satisfac- however, few studies have actually tested this proposition (e.g.,
tion. For example, the salary received by other people is Berkowitz et al, 1987; Ronen, 1986). Moreover, methodological
thought to be one determinant of what employees believe they shortcomings limit the usefulness of those studies as tests of the
should be paid. multiple discrepancies hypothesis.

Social Comparisons Methodological Considerations


Equity, relative deprivation, and social comparison theorists
The present study was designed to test the multiple discrep-
have all proposed that satisfaction is influenced by "compari-
ancies hypothesis while taking into account two methodologi-
son others," either in the form of particular individuals or an
cal considerations often overlooked in previous studies of pay
abstracted "average" other person (eg, Adams, 1965; Crosby,
satisfaction: (a) statistically controlling for actual pay, and (b)
1976; Festinger, 1954). On the basis of extensive research dem-
analyzing separate measures of actual salary and standards of
onstrating that satisfaction is influenced by the experiences
comparison.
encountered by other people operating within onels social con-
Controlling for actual salary. As documented in a recent
text, Lawler (1971,1981) included comparisons with others' pay
review by Heneman (1985), many empirical studies of pay satis-
in his model of pay satisfaction. In this study, we considered
faction have failed to control for actual salary when testing
comparison others working in the same organization as the
hypotheses derived from discrepancy models of pay satisfac-
respondent and comparison others doing similar types of work
tion. This control is absolutely essential because actual salary
in other organizations because recent research suggests that
level
social comparisons internal and external to the employing orga-
nization can be relevant to pay satisfaction (e.g., Berkowitz, has a consistently demonstrated effect on pay satisfaction, and
Fraser, Treasure, & Cochran, 1987; Cappelli & Sherer, 1988; many other potential causal variables are quite likely to covary
with it. Thus, when examining the effects of these other variables
Ronen, 1986).
on pay satisfaction, the effect should be estimated, net of any
covariance with pay level. (Heneman, 1985, pp. 134-135)
Minimum Acceptable Salary
Despite this strong warning, three recent pay satisfaction stud-
Locke and his colleagues have used "minimum acceptable ies involving multiple standards of comparison failed to control
amount" as a standard of comparison in several job satisfaction directly for actual salary in the manner suggested by Heneman
studies (Locke, 1969, 1976; Mobley & Locke, 1970). Even (Berkowitz et al, 1987; Ronen, 1986; Scholl, Cooper, &
though the results from this research have been quite strong, McKenna, 1987). Thus, there is still a need for studies that test
few other researchers have considered this particular standard multiple discrepancy predictions of pay satisfaction while con-
of comparison. Minimum acceptable amount seems promising trolling for actual salary. The present study was designed to
as a standard for evaluating pay satisfaction because it implies meet this need.
instrumental uses of money (to purchase desired goods and Separate measures. Recent pay satisfaction studies involv-
services, for status and prestige, for self-validation). ing multiple standards of comparison have generally used re-
We do not claim that the four particular standards of compar- spondent perceptions of discrepancies to operational ize the dis-
ison considered in this study are the only standards that might crepancy concept (e.g, Ronen, 1986; Scholl et al, 1987), but
be relevant to pay satisfaction. For example, pay satisfaction there were no direct measures of the standards themselves. For
might also be influenced by what people have earned in the example, subjects in Scholl et al.'s study reported whether their
past, what they hope to earn in the future, and what other salary was more than, less than, or equal to each of several
people in their families earn. We are unaware of any conceptual standards of comparison (e.g, the salary received by others do-
model, however, that specifies all the standards of comparison ing the same job or the salary respondents believed they should
involved in the discrepancy processes thought to determine pay receive). There was no effort to measure the salary that respon-
satisfaction. Consequently, there is no basis for judging how dents believed others were receiving or the salary respondents
well this particular sample of four standards represents the uni- believed they should be receiving. By relying solely on reported
388 R. RICE, S. PHILLIPS, AND D. McFARLIN

discrepancies between actual salary and selected standards of naire. Potential respondents were selected from national professional
comparison, researchers may force respondents to make com- directories. Doctoral-level psychologists were selected from the Ameri-
parisons that they might not normally make. can Psychological Association's 1985 Membership Directory. Master's-
Stronger support for the thought processes proposed by the level social workers were selected from the National Association of
Social Workers' 1985 Directory of Clinical Social Workers. All of the
multiple discrepancies hypothesis can be drawn from the re-
selected professionals were 1 isted as working primarily in clinical prac-
sults of appropriate statistical analyses conducted on separate
tice, in either group or agency settings.
measures of actual salary and several selected standards of com-
The postal service was unable to deliver 13 of the packets. Of the
parison. In the present study, we collected independent mea- remaining 587 potential subjects who received surveys, 169 (29%) pro-
sures of actual salary and four standards of comparison. Multi- vided complete sets of data for the analyses described in this article.
ple regression analyses of these independent measures were These data were produced by two mailings, the second going only to
used to examine discrepancy effects associated with these stan- those who did not respond to the first. A total of 363 subjects (61.8%)
dards. Such analyses can detect patterns consistent with discrep- mailed back a response. Of these, 54 returned blank questionnaires;
ancy theory predictions without prompting subjects to make most people returning blank questionnaires had either entered private
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particular comparison judgments. practice (13 subjects) or indicated that they did not want to participate
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(32). This left 309 subjects (52.6% of the total sample) who had returned
On the basis of the multiple discrepancies hypothesis, we
completed or mostly completed questionnaires. From these 309 sub-
made three predictions concerning the results of multiple re-
jects, we discarded the 19 subjects who were working part-time. We
gression analyses of separately collected measures of actual sal-
eliminated an additional 121 subjects who did not provide data on one
ary and four standards of comparison. First, we predicted that or more of the variables included in our analyses: 16 subjects did not
variables representing discrepancy effects for the four stan- report current salary, 34 did not indicate what they thought they should
dards of comparison considered in this study would provide a receive, 50 did not report the average salary of others, 76 did not list the
significant change in R2 when added to a multiple regression salary of a specific other in their organization, and 21 did not give a
equation that already included actual salary as a predictor vari- minimum salary. Several subjects omitted more than one of these
able. Such a result would support the proposition that discrep- items.
ancies involving these four standards of comparison have some
statistically unique power to predict and explain pay satisfac- Measures
tion even after controlling for the effects of actual salary
Five demographic variables were measured: gender (0 = female, 1 =
Second, we predicted that the set of discrepancy-related vari- male), degree (0 = MSWi 1 = PhD), time spent working as a mental
ables based on all four standards of comparison would predict health professional (years of experience); age, and current annual sal-
pay satisfaction better than would discrepancy-related vari- ary (actual salary).
ables based on any single standard of comparison. More specifi- The following single questions were used to assess each of four stan-
cally, we predicted a significant increment in Jt2 when discrep- dards of comparison against which respondents might evaluate their
ancy variables related to the three remaining standards of com- current salary:
parison were added to a prediction equation already including 1. "What should be the annual salary of people holding jobs compa-
rable to your own?" (deserved salary);
the discrepancy variables related to any single standard of com-
2. "Please think of the one person at work with whom you most
parison. That is, the discrepancy-related variables associated
compare yourself. What is that person's salary?" (other's salary);
with any single standard of comparison were expected to pre-
3. "Please estimate the averageannual salary in your region for peo-
dict pay satisfaction less well than the discrepancy-related vari- ple holding jobs comparable to your own." (average salary); and
ables associated with the entire set. 4. "What would you consider to be the minimally acceptable an-
Finally, we predicted that the form of the discrepancy effects nual salary for people holding jobs comparable to your own?" (mini-
detected in these analyses would generally show that standards mum salary).
of comparison have negative effects on pay satisfaction when A 4-item pay satisfaction scale was created. Two items were adopted
actual salary is held constant. That is, among respondents re- from Hackman and Oldhairis (1975) Job Diagnostic Survey: "The an-
ceiving the same actual salary, we expected pay satisfaction to nual salary for my job is excellent," and "I am paid quite fairly, given
what I contribute to this organization." The third item was modified
be higher when standards of comparison were lower.
from Smith, Kendall, and Hulin's (1969) Job Descriptive Index: "My
annual salary does not provide me with enough money to meet normal
Method living expenses" (reverse coded). The final item"I am satisfied with
my salary"was written specifically for this survey. Each item was
Subjects presented in a 5-point agree-disagree Likert format. The alpha coeffi-
cient for this scale was .88.
A sample of 169 mental health professionals provided the mail sur-
We conducted separate analyses of the data provided by social
vey data analyzed for this study. Of these subjects, 105 (62%) were male,
workers and clinical psychologists. Because these analyses yielded sim-
and 106 (63%) held doctoral degrees. On average, they were 43.5 years
ilar results, we combined the two samples. All of the results reported
of age, had 15.5 years of experience in the mental health field, and
are based on analyses of the combined sample.
earned an annual salary of $41,277.

Results
Procedure and Return Rate
Descriptive Statistics
A total of 600 potential respondents, 300 social workers and 300
psychologists, were sent a survey packet through the mail. Each packet Table 1 presents the means, standard deviations, and inter-
contained a cover letter, a stamped return envelope, and the question- correlations for the 10 variables used to test the multiple dis-
MULTIPLE DISCREPANCIES AND PAY SATISFACTION 389

Table 1
Means, Standard Deviations, and Intercorrelations for All Measures

Measure M SD

\ . Pay satisfaction 3.3 1.0


2. Actual salary .50** 41,277.0 14,193.0
3. Gender .11 .25** 0.6 0.5
4. Degree .08 .37** .00 0.6 0.5
5. Years experience .11 .05 .04 .32** 15.5 8.0
6. Age .06 -.03 -.09 .31** .76** 43.5 7.9
7. Deserved salary .19* .74** .16* .35** .04
-.01 47,623.0 16,814.0

8. Othert salary .18* .51** .12 .19* .01 -.04 .38** 49,378.0 28,349.0
9. Average salary .23** .70** .11 .41** .11 .05 .71" .29** 38,917.0 12,647.0
10. Minimum salary .08 .66** .09 .33** .10 .01 .81** .26** .72** 37,225.0 11,546.0
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Note. N= 169.
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* p < .05, two-tailed. **p<.01, two-tailed.

crepancy hypothesis. Four general observations from this table regression equation already including the main effects, these
are useful in interpreting the substantive results reported in the cross products represent Actual Salary X Standard of Compari-
following sections. First, the subjects generally earned less than son interactions. On the basis of the multiple discrepancies
they believed they deserved, and less than the other people in hypothesis, we predicted that Step 3, or Step 4, or both would
their organizations with whom they most directly compared produce significant changes in R2 as the discrepancy-related
themselves. On average, subjects earned more than the mini- variables were entered into the regression equation.
mum acceptable salary for the job and more than the average The discrepancy-related variables considered in the last two
salary in the region for people in their positions. Second, the steps of this analysis nearly doubled the explained variance in
four standards of comparison were positively intercorrelated (rs pay satisfaction, which rose from 26.1% to 46.7%. The four
ranged from .26 to .81); the correlations between other's salary demographic variables considered at Step 1 accounted for only
and the three remaining standards were substantially lower, 4.1% of the variance in pay satisfaction (a nonsignificant
however, than the intercorrelations among the three remaining amount). When actual salary was added to the equation at Step
standards themselves (rs ranged from .26 to .38 and from .71 to 2, the increment in explained variance was large (220) and
.81, respectively). Third, salary was positively correlated with highly significant, combining with the four demographic vari-
each of the four standards of comparison. Fourth, pay satisfac- ables to account for 26.1 % of the variance. The additive discrep-
tion correlated far more strongly with actual salary If = .50) ancy effects in Step 3 explained an additional 13.6% of the
than with any standard of comparison or demographic variable variance, and the nonadditive discrepancy effects in Step 4 ex-
(rs ranged from .06 to .23). plained 7.0% more variance. These results provide strong sup-
port for the multiple discrepancies hypothesis. Apparently, dis-
crepancy-related variables do have an influence on pay satisfac-
Multiple Discrepancies
tion that is statistically independent of actual salary.
To test the ability of discrepancy variables involving all four
standards of comparison to predict pay satisfaction, we con-
Single Versus Multiple Discrepancies
ducted a moderated regression analysis (Cohen & Cohen, 1983; According to the multiple discrepancies hypothesis, pay satis-
Zedeck, 1971). This analysis allowed us to test both additive faction should be more accurately predicted when several stan-
and nonadditive discrepancy effects while controlling for ac-
tual salary and other potentially confounding variables. In this
analysis, pay satisfaction was the dependent variable. As indi- Table 2
cated in Table 2, predictor variables were entered into the re- Results of the Moderated Regression Analysis of
gression equation in the following sequence: The four demo- Multiple Standards of Comparison
graphic controls (gender, degree, years of experience, and age)
Predictor R2 &R2
were entered in Step 1; actual salary was entered in Step 2; the
four standards of comparison (deserved salary, other's salary, Step Idemographics (gender, degree, years
average salary, and minimum salary) were entered in Step 3; and experience, age) .041 .041
the four computed cross-product variables resulting from multi- Step 2actual salary .261 .220*
Step 3standards of comparison (deserved salary,
plying each of the standards of comparison by actual salary
other's salary, average salary, minimum salary) .397 .136*
were entered in Step 4. Step 4interactions (Actual Salary X Deserved
Simple (additive) discrepancy effects can be demonstrated at Salary; Actual Salary X Other's Salary; Actual
Step 3 by the main effects of the four standards when holding Salary X Average Salary; Actual Salary X
Minimum Salary) .467 .070*
constant the effect of actual salary More complex (nonadditive)
discrepancy effects can be demonstrated at Step 4 when the Note. Pay satisfaction is the dependent variable.
cross products are added to the equation. When entered into a *p<.01.
390 R. RICE, S. PHILLIPS, AND D. McFARLIN

Table 3 ancy-related variables relevant to a particular standard of com-


Results of Moderated Regression Analyses Involving Separate parison were entered last into an equation already containing
Standards of Comparison all the other predictors (i.e, the four demographic variables,
2 actual salary, the three other standards of comparison, and the
R three other cross products). As shown in Table 4, significant
Step Step Step Step Step increments in R2 were found for two standards of comparison:
Standard of comparison 1 2 3 4 5 deserved salary and minimum salary Within the context of the
four standards of comparison considered in this study, discrep-
Deserved salary .041 .261" .329** .386** .467"
ancies related to these two standards showed the greatest power
Other's salary .041 .261" .268 .289* .467"
to provide statistically unique predictions of pay satisfaction.
Average salary .041 .261** .290** .316* .467**
Minimum salary .041 .261** .381" .417" .467*

Note. Pay satisfaction is the dependent variable. Step IDemo- Form of Discrepancy Effects
graphics (gender, degree, years experience, age); Step 2actual salary;
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Step 3target standard of comparison; Step 4cross product of ac- By graphing the relationship between actual salary and pay
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tual salary and target standard of comparison; Step 5remaining satisfaction at high and low levels of each standard of compari-
standards of comparison and cross products. son, it is possible to examine the form of the discrepancy effects
* p < .05 for increment in R2. ** p < .01 for increment in R2.
detected in these analyses. Using the procedure recommended
by Cohen and Cohen (1983), we substituted two different val-
ues for each standard of comparison into the seven-predictor
dards of comparison are simultaneously considered than when regression equations provided at Step 4 of the analyses summa-
just a single standard of comparison is considered. To test this rized in Table 3. A score one standard deviation above the
proposition, we conducted four additional regression analyses. mean for the standard of comparison was used to represent
As indicated in Table 3, predictor variables were entered into subjects with high standards, and a score one standard devia-
these regression equations in the following sequence: The four tion below the mean was used to represent subjects with low
demographic control variables were entered in Step 1; actual standards. For each demographic variable the mean value was
salary was entered in Step 2; one standard of comparison was substituted into the seven-predictor equation. This procedure
entered in Step 3; the cross product created by multiplying ac- allowed us to control for differences in demographic factors
tual salary and the standard of comparison entered at Step 3 while examining the substantive relationships among actual
was entered in Step 4; and the three remaining standards of salary, standard of comparison, and pay satisfaction. The
comparison and their cross products were added in Step 5. graphs yielded by this procedure followed precisely the same
The importance of considering more than one standard of form for all four standards. One graph with deserved salary
comparison is demonstrated at Step 5 in these analyses. On the (amount should get) as the standard of comparison, is presented
basis of the multiple discrepancies hypothesis, we predicted as an example in Figure 1. Graphs and complete regression
that Step 5 for each of these analyses would produce a signifi- equations for all four standards of comparison are available
cant change in R2. Such a result would indicate that the entire from Robert W Rice.
set of discrepancy-related variables provides a significantly The additive discrepancy effect is portrayed through the po-
more accurate prediction of pay satisfaction than does the set of sitioning of the two regression lines. The regression line for
discrepancy-related variables associated with any single stan- respondents believing they should get a relatively low salary lies
dard of comparison. above the regression line for respondents believing they should
The results confirmed the value of considering multiple dis- get a relatively high salary. This pattern is consistent with pre-
crepancies. The total R2 values at Step 4, with only one standard dictions based on discrepancy theory. Lower standards of corn-
of comparison entered into the equation, ranged from .289 to
.417 (see Table 3). Step 5, however, produced a significant incre-
ment in R2 in each analysis. That is, the total R2 values asso-
Table 4
ciated with any individual standard of comparison was signifi-
Results of Moderated Regression Analyses When Each
cantly less than the total R1 for the analysis combining all four
Standard of Comparison Is Entered Last
standards of comparison (total R2 = .467). These results pro-
vide further support for the multiple discrepancies hypothesis. R2
Apparently, pay satisfaction is determined by a complex cogni- Standard of comparison
tive appraisal process in which people make simultaneous use entered last Stepl Step 2 R2
of several standards of comparison. No single standard of com- .444 .467 .023*
Deserved salary
parison included in this study could explain as much variance Other's salary .449 .467 .018
in pay satisfaction as the combined effects of all four standards. Average salary .465 .467 .002
Minimum salary .417 .467 .050**

Unique Predictive Power Note. Pay satisfaction is the dependent variable. Step 1demographics
(gender, degree, years experience, age), actual salary, first three stan-
To assess the unique predictive power of the discrepancy-re- dards of comparison and their cross products with actual salary. Step
lated variables associated with each standard of comparison, 2last standard of comparison and its cross product with actual sal-
we conducted four additional analyses. In each, the two discrep- ary.
MULTIPLE DISCREPANCIES AND PAY SATISFACTION 391

ciated with the two discrepancy-related variables achieved sta-


5 Lo Standard tistical significance only for minimum salary and deserved sal-
ary. Taken together, these two sets of analyses suggest that pay
4 satisfaction is more strongly related to discrepancies involving
minimum salary and deserved salary than to discrepancies in-
Pay Level 3 Hi Standard
volving other^ salary or average salary.
Satisfaction
z
Discussion

The results of this study strongly support the multiple discrep-


ancies hypothesis. Consistent with the conceptual analyses put
forth by Goodman (1974), Heneman (1985), Lawler (1971),
20 30 40 50 60
Locke (1976), and others, discrepancy-related variables were
Actual Salary (KOOO's)
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powerful predictors of pay satisfaction. Together, the discrep-


This document is copyrighted by the American Psychological Association or one of its allied publishers.

Standard - Amount Should Get ancy-related variables for four standards of comparison nearly
Figure 1. Actual Salary X Standard of Comparison interaction. doubled the explained variance in pay satisfaction over that
accounted for by demographic variables and actual salary.
When analyzed separately, each standard of comparison
showed significant discrepancy-related effects. For each individ-
parison are associated with higher satisfaction, as long as differ-
ual standard, however, the discrepancy-related effects asso-
ences in actual salaries are statistically controlled. Presumably, ciated with the single standard were significantly weaker than
this effect operates through a discrepancy mechanism, with effects for the set of all four standards. These results suggest
lower standards of comparison creating smaller discrepancies that the thought processes determining pay satisfaction involve
with actual salary, which, in turn, produce higher satisfaction.
the simultaneous use of more than one standard of com-
The significant main effect at Step 3 of the analysis with de- parison.
served salary as the standard of comparison added an incre- Our moderated regression analyses showed both additive and
ment of .068 to the explained variance in pay satisfaction and nonadditive discrepancy-related effects. The additive, or main,
yielded a significant standardized regression coefficient of effects indicated that when salary is held constant, lower stan-
-.39. This negative regression coefficient is consistent with the
dards of comparison are associated with higher pay satisfaction.
positioning of the low deserved salary regression line above the
Conversely, when a standard of comparison is held constant,
high deserved salary regression line. higher salaries are associated with higher pay satisfaction. Such
The nonadditive discrepancy effect of the Actual Salary X main effects are fully consistent with the predictions based on
Deserved Salary interaction is portrayed graphically by the di- discrepancy theories of satisfaction.
vergence from parallel in the two regression lines. As shown in
The nonadditive effects in these regression analyses indicate
Figure 1, the regression lines are somewhat further apart in the
that salary and standards of comparison interact to influence
higher range of actual salaries. This divergence indicates that
pay satisfaction. These interactions show that (a) pay satisfac-
the relationship between deserved salary (amount should get) tion was highest when salary was high and the standard of
and pay satisfaction is stronger among respondents receiving
comparison was low and (b) when salary was low, there were
higher actual salaries. When salaries were high, respondents
small differences in the satisfaction of respondents with high
believing that they should be paid relatively small salaries were
and low standards of comparison. These interactions suggest
considerably more satisfied than their counterparts with high that there may be a threshold for the operation of discrepancy
standards. When salaries were low, however, there was little effects. When actual salary is low, the standards of comparison
difference in the pay satisfaction of respondents with high and
considered in this study may play little or no role in determin-
low standards of comparison. All respondents, regardless of
ing pay satisfaction. The role of such standards may be acti-
their comparison standards, had relatively low pay satisfaction
vated, however, when a certain threshold of pay is achieved.
at the lower range of actual salaries. The significant interaction
Further research is needed to examine the possible role of such
at Step 4 of this analysis added an increment of .058 to the
thresholds in a stagelike progression of different factors in-
explained variance in pay satisfaction in the analysis using de- fluencing pay satisfaction.
served salary as the standard of comparison.
Analyses of the unique predictive power of each standard of
comparison revealed that two standards explained variance in
Relative Strength of Discrepancy Effects pay satisfaction not explained by any other standard: (a) the
salary people believed they should get (deserved salary) and (b)
As shown in Table 3, the separate analyses of discrepancy-re- the minimum salary they were willing to accept (minimum
lated variables associated with each standard of comparison salary). Given the substantial correlation between these two
produced statistically significant effects for each standard of standards, it is somewhat surprising to find that each one pro-
comparison. These effects were stronger for minimum salary vided some statistically unique information. It is also surprising
(R2 = .417) and deserved salary (R2 - .386) than for average that the salary of the individual-comparison other (i.e, other's
salary (R2 = .316) or other's salary (R2 ~ .289). As shown in salary) did not explain any unique variance in pay satisfaction.
Table 4, the analyses of the incremental variance uniquely asso- A unique contribution might have been expected for this stan-
392 R. RICE, S. PHILLIPS, AND D. McFARLIN

dard of comparison because it is not highly correlated with the ries by expressing the belief that they were entitled to higher
other three standards. These results suggest that the low corre- salaries. Discrepancy theory would predict that believing you
lations between other's salary and the three alternative stan- are entitled to a higher salary will have a negative effect on pay
dards may be the result of unreliability (because of the item's satisfaction because such beliefs represent higher standards of
idiosyncratic format) and not the result of tapping a different comparison (this prediction was not tested by Major et al.,
domain of standards. 1984). The strategy of demanding high wages on the grounds of
The results of this study illustrate the dangers of ignoring entitlement may not, then, have any net positive effect on pay
Heneman's (1985) warning to control for actual salary when satisfaction if the one determinant moves in a direction condu-
examining the effects of other variables on pay satisfaction. The cive to higher satisfaction (i.e, higher actual salary) while the
regression coefficients for each standard of comparison were other determinant moves in a direction conducive to lower satis-
negative when predicting pay satisfaction while controlling for faction (i.e, higher standards of comparison). Clearly, it is not
actual salary, but the zero-order correlations between these easy to achieve personal satisfaction.
standards of comparison and pay satisfaction were positive.
Taken at face value, these correlations suggest that higher stan-
This article is intended solely for the personal use of the individual user and is not to be disseminated broadly.

Limitations and Future Research


This document is copyrighted by the American Psychological Association or one of its allied publishers.

dards of comparison lead to higher pay satisfaction, a conclu-


sion that is inconsistent with both the predictions of discrep- The theoretical and applied implications of this study are
ancy theory and the conclusions suggested by the results of our limited by the sample used and the standards of comparison
multivariate analyses. considered. Fortunately, we have some evidence that these re-
sults are not id iosy ncratic to social workers and clinical psychol-
ogists. In a study of students working part-time while attending
Application
college, we examined standard-of-comparison effects with re-
The present results suggest that compensation professionals gard to many job facets, including pay (Rice, McFarlin, & Ben-
are likely to encounter difficulties because of employee differ- nett, 1989). In that study, we considered one standard of com-
ences in standards of comparison. People with higher stan- parison: wanted amount of the job facet (e.g, hourly pay, hours
dards of comparison are generally less satisfied with their pay per week). When we analyzed satisfaction with hourly rate of
than people with lower standards of comparison. Moreover, as pay, the results showed the same pattern portrayed in Figure 1.
suggested by the results illustrated in Figure 1, it may take big- Despite the encouraging results from this study, further re-
ger increases in actual salary to increase pay satisfaction among search is needed to evaluate more fully the generalizability of
respondents with higher standards of comparison. These re- the findings from the present study.
sults show that individual differences in standards of compari- These results highlight the need for further refinement of
son make it impossible to satisfy everybody with regard to their multiple discrepancy models of pay satisfaction. It would be
pay. At a minimum, then, it might behoove compensation pro- useful to develop and test a formal model that attempts to iden-
fessionals to measure different standards of comparison in tify all standards of comparison relevant to pay satisfaction.
their workforces. Because the deserved salary and minimum salary variables
Available research does not indicate whether personal stan- showed the strongest individual discrepancy effects in this
dards of comparison can be changed or how such change might study, pay satisfaction theorists ought to give high priority to
be managed. If personal standards can be changed, administra- these two standards of comparison.
tors might attempt to lower the personal standards of their Our results demonstrate the validity of the multiple discrep-
employees. Standards of comparison might be lowered by pub- ancy hypothesis with regard to the four standards of compari-
licizing information indicating that salaries are similar or lower son considered. Because this study was not designed to test an
in other organizations. Standards of comparison might also be explicit multiple discrepancy model of pay satisfaction, we can-
lowered by emphasizing the contributions that the organization not offer firm conclusions about the merits of any specific
provides for its employees and by de-emphasizing the contribu- model. There is theoretical significance, however, in the find-
tions that the employees provide for the organizations. The ing that the salary people felt they should receive did not appear
latter strategy might backfire, however, if it leads to low recogni- to act as a master standard of comparison, in contrast to the
tion of employees' efforts and the negative effects associated theories of pay satisfaction offered by Lawler (1971) and Hene-
with feeling unrecognized and unappreciated. In trying to man (1985). Discrepancy-related variables associated with
manage pay satisfaction, perhaps the best an organization can other standards of comparison contributed to predictions of
do is to develop and consistently apply clear criteria for setting pay satisfaction even when we statistically controlled for the
salary levels; such criteria could be made available to employees discrepancy effects associated with the salary people believed
in hopes that they adjust their standards to more realistic levels. they should receive. These results suggest that this one standard
If one considers the implications of these results from the of comparison does not mediate completely the effects that
perspective of enhancing individual satisfaction, a paradox other standards of comparison have on pay satisfaction. Rather,
arises. To be satisfied, one must have both a high salary and low it appears that some of the effect associated with these other
standards of comparison. Unfortunately, strategies for enhanc- standards was direct and some was indirect (i.e., mediated
ing the effect that one of these determinants has on pay satisfac- through what people believed they should receive).
tion may adversely influence the effect that the other has on In interpreting these results, it is important to remember that
satisfaction. For example, Major, Vanderslice, and McFarlin different measurement procedures may lead to different results
(1984) found that job applicants could bring about higher sala- and conclusions regarding the mediating role of any specific
MULTIPLE DISCREPANCIES AND PAY SATISFACTION 393

standard. For example, one might ask questions in a way that Heneman, H. G. (1985). Pay satisfaction. In K. M. Rowland & G. R.
highlights a particular standard of comparison: "When you Ferris (Eds.), Research in personnel and human resources manage-
compare yourself to other people in your region with similar ment (Vol. 3, pp. 115-139). Greenwich, CT: JAI Press.
jobs, what should your salary be?' By phrasing questions so that Lawler, E. E. (1971). Pay and organizational effectiveness: A psychologi-
cal view. New %rk: McGraw-Hill.
they make an explicit connection to what people feel they
Lawler, E. E. (1981). Pay and organizational development. Reading,
should receive, peoplels beliefs about what they should receive
MA: Addison-Wesley.
may act as a master standard of comparison. The sequencing of
Locke, E. A. (1969). What is job satisfaction? Organizational Behavior
questions about standards of comparison may also influence
and Human Performance, 4, 309-336.
the relative strength of discrepancy-related effects associated Locke, E. A. (1976). The nature and causes of job satisfaction. In M. D.
with each standard. For example, what people believe they Dunnette (Ed.), Handbook of industrial and organizational psychol-
should receive may act as a master standard if people are asked ogy^. 1297-1349). Chicago: Rand McNally.
about this issue immediately after they are asked about a mini- Major, B, Vanderslice, V, & McFarlin, D. B, (1984). Effects of pay
mum acceptable amount, what others are paid, previous pay, expected on pay received: The making of a self-fulfilling prophecy
This article is intended solely for the personal use of the individual user and is not to be disseminated broadly.

and so forth. Future research should examine these issues. Journal of Applied Social Psychology, 14, 399-412.
This document is copyrighted by the American Psychological Association or one of its allied publishers.

In conclusion, the present study suggests that discrepancies Martin, J. (1981). Relative deprivation: A theory of distributive injus-
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