The relationship between interclass pay equity and production quality is examined in a sample of 102 corporate business units.

The relationship between interclass pay equity and production quality is examined in a sample of 102 corporate business units. A small pay differential between lower-level employee and upper-echelon managers (after controlling of inputs) is theorized to lead to high performance quality by increasing lower-level employees' commitment to top-management goals, effort, and cooperation. Interclass pay equity is determined by the agency of comparing the pay and inputs of hourly workers and of lower-level managers and professional to those of the top three plains of managers. Consistent with the prediction of distributive justice history theory, bot measures of pay equity are positively related to business-unit work quality.(*)

Lower-echelon employee are paid abundant less than upper-echelon managers in North American and Western European businesses. Moreover, the pay differential between the lower and upper strata of organizations in these countries is a great deal larger than in Japan (Koike, 1988; Crystal, 1991) and it has substantially increased since the early 1970 (Harrison and Bluestone, 1988) Many lower-level employee belive that this interclass pay differential is inequitable.

The emotional significance of interclass pay equity is shown in the angry messages that were pillared on Apple's internal computer bulleting board when Chief Executive Officer John Sculley's record 1989 compensation was announced at the same time that the profit-sharing formula was revised to be les generous to other employee undivided employee commented. "Morale is somewhat like it must have been just before the French Revolution; everyone wants to beat the royalty" (Wolf, 1990: 6A). A similar situation occurr in 1982 when General Motors negotiated wage concessions from its unionized employee and then announced that executives would receive large bonuses. The employee outrage that ensu l General Motors to cancel the bonuses (Freeman and Medoff, 1984)(1)

As illustrated at the incidents at Apple and General Motors, research has shown that lower-level employee compare their pay to that of higher-status form into groupss and that this comparison can terminate in feelings of inequity (for a review, descry Dornstein, 1991). However, although there has been extensive reseach forward distributive justice, there have been no studies of the meanings of interclass pay equity in succession any aspect of organizational effectiveness. This relationship is gaining importance to be paid to the conflict between widely used participative management practices and the growing economic inequality between lower and upper organizational strata. There is a fundamental ideologial tension between the egalitation premises gthat underlie participative management and the existence of large interclass reward differentials.

outcome quality is a particularly important aspect of organizational effectiveness to examine in conjunction with interclass pay equity because quality is highly sensitive to motivational factors that are influenced at distributive justice. Moreover, product quality is critical to the economic performance of businesses and to consumer satisfaction. However, despite the importance of crops quality to many organization stakeholders, little is known about for what cause it is affected by organizational factors. In this paper, we integrate equity, relative deprivation, and quality-management theories in a prototype of the relationship between interclass pay equity and the harvest quality of business organizations.

DISTRIBUTIVE JUSTICE

the two equity and relative deprivation theories of distributive justice focus forward the social comparison of rewards. These pair perspectives provide the basis for the theorical original examined in this study.

Equity Theory

Equity theory states that race in social exchange relationship believe that rewards should be distributed according to the leve3l of individual contribution (Adams, 1965; Homans, 1974; Walster, Walster, and Berscheid, 1978) Individuals justice the fairness of their exchange relationships with their organizations by the agency of comparing the balance between the inputs they contributes (eg work effort and skills) and the issues they receive (e.g., pay) to the input-outcome balances of their respect groups. When individuals perceive that their ratio of inputs to results is similar to that of their comparative referent they have feeling that equity exists. Dissimilar ratios lead to perceptions of inequity. folks attempt to reduce the distress caused by dint of inequity in three ways. First, individuals may change their perceptions of either their hold or their reference group's inputs and consequences Second, individuals can alter their actual inputs (eg decrease their work effort) or results (e.g., get a pay raise). Finally, individuals can completion inequitable relationships by leaving their organizations.

There has been extensive research upon the effects of pay equity forward work attitudes and behavior, as it is as py and job satisfaction (eg Oldham et al., 1986) absenteeism (eg Dittirch and Carrell, 1979) sickness and accident compensation richnesss (e.g., Sashkin and Williams, 1990) turnover (eg Telly French and Scott 1971) and work performance (eg Pritchard, Dunnette and Jorgenson 1972; Summer and Hendrix, 1991) However, equity theory research has not addressed the pay comparisons between lower and higher classes of employee that are focus of this study