Gender Differences In Pay Satisfaction And Pay Expectations.(Brief Article)

Although not the focus of the current study, the data reported here make clear the importance of current salary in accounting for pay expectations. The beta coefficient for salary in the analysis of expected salary and in the analysis of expected percent change in salary was .69 and -.41, respectively. Clearly when studying pay expectations of experienced members of the labor force, current salary is the dominant variable. When it is not included, many career path and job input variables are found to be significant, but are not significant when the effects of salary are considered.

Our findings suggest that spouse's salary and family financial situation are important to include in studies of pay satisfaction and pay expectations among experienced members of the labor force. The data pertaining to spouse's salary suggest this is an important variable both in one's estimate of appropriate pay in one's current job, and in estimating the expected salary in a future position. Conversely, one's assessment of the family financial situation appears to be related to pay satisfaction. Since this variable is significant when both spouse's salary and one's current salary are included in the analysis, it is making a unique contribution to explaining pay satisfaction beyond family income.

While not a central part of the study, our findings regarding the impact of spousal salary on pay satisfaction have potential implications regarding equity theory formulations. As postulated by Adams (1965), an individual determines whether or not a situation is equitable by comparing a ratio of one's own outcomes to inputs with the ratio of outcomes to inputs of a relevant comparison other. As equity theory is discussed in the context of explaining perceptions of pay fairness and satisfaction in compensation textbooks (e.g., Milkovich and Newman, 1996), it is implied that the point of comparison is a co-worker employed by the same organization or an employee in a similar job at another organization. Because spouse's salary makes a significant contribution in most of our analyses, future research in the area of pay satisfaction and pay expectations may find it fruitful to include a measure of estimated earnings of one's significant other or close friend.

Finally, our findings support the validity of Adam Smith's compensating differentials hypothesis. The data suggest that when a job is more interesting, has greater job security and better benefits and opportunities for advancement, one is more satisfied with a given level of compensation. These findings also lend support to the employer of choice pay strategy described by Milkovich and Newman (1996). This strategy suggests that by providing a work environment that is intrinsically rewarding and secure, an employer can be in a strong position to attract and retain labor and achieve higher levels of job satisfaction than would otherwise be observed with a given level of direct compensation.

Managerial Implications

Women appear to be more satisfied than men with a given level of compensation. Given the increased number of women in the work force, it may be necessary for organizations to re-examine their current practices for attracting and retaining qualified employees. A second practical application involves support for the compensating differentials theory or the employer of choice pay strategy. By providing interesting work, good benefits and job security along with opportunities for advancement, an employer can expect higher pay satisfaction with a given level of direct compensation.

A third finding which has clear implications for managers is the importance of current salary in explaining pay satisfaction and pay expectations. Current salary dominates the findings. All other variables considered in the current investigation have, by comparison, a modest relationship with pay satisfaction and pay expectations. One may react to this suggestion by stating that it is so obvious that it is not necessary to point it out. We agree that the importance of current salary in accounting for satisfaction and pay expectations should be obvious. However, this relationship is seldom emphasized in compensation textbooks. Hence, we suggest it is appropriate to point out to managers that current salary dominates pay satisfaction and pay expectations.

Strengths and Limitations

A major strength of this study lies in the sample. Existing research on gender and pay satisfaction has relied primarily on information gathered from undergraduate students regarding their expectations for their first job after graduation. The data used in this study capture information from individuals from all corners of the United States who are currently working full-time. Generalizability of the study is strengthened by the fact that respondents come from a variety of industries and firms differing in size. The nature of the sample, however, poses several limitations to the study as well. The data were collected from first-year MBA students throughout the United States. While the sample is very representative of MBA students, it is not entirely representative of the total workforce. The sample focuses on college educated workers who are highly career focused. Generalizability to other segments of the workforce is limited. Additionally, the use of several single-item measures raises the usual concerns.

The importance of social referents in determining pay satisfaction is well documented. Previous studies of pay satisfaction have used co-workers (structural equivalents) as the primary referent group. Given our reliance on a secondary data source, direct comparisons to earlier studies is not possible. As noted earlier, Shah (1998) categorizes social referents as either cohesive or structural equivalents. While we have no measure of a structural equivalent comparison person, we were able to construct a measure of a cohesive social referent. Spouse's salary was shown to be negatively related to pay satisfaction and positively related to expected salary. Future studies should include measures of both structural equivalents and cohesive referents in order to determine their overall impact.

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