Congratulations to Felix Schultz

Felix Schultz has passed his Viva with no corrections. Congratulations Felix, from everyone at CERIC.

Thesis title:

The effect of intra-workplace pay inequality on employee trust in managers and workplace performance: The interplay of fairness perceptions, shared values, and collective employee voice.

Short Synopsis:

Income inequality in OECD countries is at its highest level in half a century. Research on the macro level has consistently found a negative relationship between income inequality and trust in others. Investigating the effect on trust is crucial, because trust – both in society and within organisations – can be seen was the glue that keeps us together. In his PhD, Felix was motivated to find out if similar relationships also play out on the meso level and, if so, what factors might be responsible for them.

To investigate this, Felix studied the relationship between pay inequality and employee trust in managers at the workplace level using the 2011 Workplace Employment Relations Study – a large scale employer-employee matched survey representative of workplaces in Britain.

Using machine learning algorithms, the findings suggest that, contrary to the macro level, the relationship between intra-workplace pay inequality and employee trust in managers is non-linear, following an inversely U-shaped pattern. Simply put, the relationship is positive for small and moderate levels of pay inequality. However, once pay inequality passes a threshold, any increase in pay inequality is associated with lower levels of employee trust in managers. The found underlying mechanisms for this relationship were an employee’s fairness perception and shared organisational values. Institutional arrangements influenced these results. In workplaces with collective bargaining agreements, the relationship was similar to the inverse “U”, whilst in workplaces without collective bargaining, the relationship was rather negative.

Ultimately, this research theoretically proposed and found empirical evidence for the role of individual perceptions of inequality – fair or unfair – which are shaped by an individual’s underlying value system. These perceptions in turn can, on average, be linked to actual levels of pay inequality. The same level of intra-workplace pay inequality maybe be experienced and perceived differently depending on the institutional features that shape other dimensions of fairness and trust in the social exchange between employees and managers; in this case collective employee voice proxied by collective bargaining agreements. To deal with unfairness related to pay, employees are likely to withdraw labour effort, to restore a fair balance between inputs and outcomes, which is suggested by the inversely U-shaped relationship between pay inequality and workplace level labour productivity.

Felix was supervised by Professor Andy Charlwood and Dr Danat Valiade.

In February 2021 Felix Schulz started as a Post-doctoral Research Fellow at the Digit Research Centre.