Final answer:
Employees' conclusions about equity in the workplace are primarily based on their chosen reference points for comparison, encompassing societal values, supply and demand for skills, and individual productivity, among other factors like efficiency wage theory.
Step-by-step explanation:
Employees' conclusions about equity depend on what they choose as a standard of comparison. In assessing perceived fairness, individuals frequently benchmark their own compensation and conditions against various reference points. Understanding equity within compensation is complex and involves considering multiple factors that can influence an employee's perception of fairness. This includes societal value of certain roles, market demand for specific skills, and individual productivity levels.
For instance, certain stars in different fields can have wages significantly higher than others due to global demand rather than educational distinctions. Evidence from U.S. Census data highlights this, showing that the salary gap is not purely driven by educational differences. Similarly, occupational structure plays a role, as teachers often earn less despite high education, due to cultural values that underpin this pay structure.
Moreover, factors like competition, economic demand, efficiency wage theory, and power dynamics shape wage decisions. Efficiency wage theory, for example, proposes that higher pay can lead to higher productivity as employees are more motivated and loyal, potentially saving employers costs associated with turnover and training.