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The effect of intra-workplace pay inequality on employee trust in managers: Assessing a multilevel moderated mediation effect model


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High levels of economic inequality are widely viewed as a key challenge facing both advanced industrial and developing economies. Country-level studies have consistently shown a negative link between income inequality and trust in others. This is typically attributed to greater social distance within unequal societies. Do we observe similar relationships within organisations? This is an important question because employee trust is associated with important outcomes for workers and organisations. We answer it by investigating the relationship between pay inequality and employee trust in managers at the workplace level using large-scale nationally representative matched employer-employee data from Britain. The paper uses innovative machine learning methods to demonstrate a curvilinear relationship between pay inequality and trust. When pay inequality is at low to moderate levels, increasing inequality is associated with increasing employee trust but when pay inequality passes a certain threshold the relationship turns negative. The relationship is mediated by employees’ perceptions of manager fairness and moderated by employee collective voice. The implications of these findings for theory, research methodology, practice and future studies are discussed.
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DOI: 10.1177/0018726721994193
human relations
The effect of intra-workplace pay
inequality on employee trust in
managers: Assessing a multilevel
moderated mediation effect model
Felix Schulz , Danat Valizade
and Andy Charlwood
University of Leeds, UK
High levels of economic inequality are widely viewed as a key challenge facing both
advanced industrial and developing economies. Country-level studies have consistently
shown a negative link between income inequality and trust in others. This is typically
attributed to greater social distance within unequal societies. Do we observe similar
relationships within organisations? This is an important question because employee
trust is associated with important outcomes for workers and organisations. We
answer it by investigating the relationship between pay inequality and employee
trust in managers at the workplace level using large-scale nationally representative
matched employer–employee data from Britain. The article uses innovative machine
learning methods to demonstrate a curvilinear relationship between pay inequality
and trust. When pay inequality is at low to moderate levels, increasing inequality is
associated with increasing employee trust but when pay inequality passes a certain
threshold the relationship turns negative. The relationship is mediated by employees’
perceptions of manager fairness and moderated by employee collective voice. The
implications of these findings for theory, research methodology, practice and future
studies are discussed.
employee voice, equity theory, fairness, machine learning, pay inequality, trust
Corresponding author:
Felix Schulz, Work and Employment Relations Division, University of Leeds, Leeds, LS2 9JT, UK.
994193HUM0010.1177/0018726721994193Human RelationsSchulz et al.
2 Human Relations 00(0)
Income inequality in Organisation for Economic Cooperation and Development (OECD)
countries is at its highest levels for the past half-century. Rising inequality and the con-
comitant increase in social distance between people of different income groups under-
mines trust in others. Whether it is across countries (e.g. Elgar and Aitken, 2011; Leigh,
2006; Wilkinson and Pickett, 2010), within countries across states (e.g. Uslaner and
Brown, 2005; Yang and Xin, 2020), across countries over time (Graafland and Lous,
2019) or in experiments where people receive different endowments (Greiner et al.,
2012), higher inequality is associated with less trust in others.
While there is ample evidence concerning the impact of income inequality on trust at
the country level, the relationship between pay inequality and trust within firms and work-
places has received less attention (Bapuji, 2015). This is a crucial gap in our knowledge
considering the significant role of intra-firm pay inequality in the overall increase in income
inequality levels (see Barth et al., 2016; Card et al., 2013; Song et al., 2019). Current work
on outcomes of intra-firm pay inequality has predominantly focused on firm performance
(Chan et al., 2020; Kelly and Seow, 2016; Wang et al., 2015) and to a lesser extent employee
attitudes (Downes and Choi, 2014; Shaw, 2014). However, trust in managers, an important
factor influencing both employee outcomes and organisational performance (Brown et al.,
2015; Sharkie, 2009; Tzafrir, 2005), has so far not been investigated.
We explore the relationship between intra-workplace pay inequality and employee
trust in managers in the United Kingdom using a large nationally representative survey
that includes responses from both workers and managers, the 2011 Workplace
Employment Relations Study. Our original contribution is threefold. First, using multi-
level regression analysis we find evidence that, in contrast to societies as a whole, trust
is higher in more unequal workplaces.
Second, extending this analysis using innovative machine learning methods, we find
that in workplaces with higher inequality employees trust their managers more, but there
is an inflection point at which the relationship turns negative. The relationship between
intra-workplace pay inequality and employee trust in managers is thus inversely
U-shaped. Third, drawing on theories of organisational fairness (Adams, 1965), we find
evidence that an employee’s perception of managers’ fairness mediates observed rela-
tionships between pay inequality and trust, and that the relationship in question is moder-
ated by employee collective voice which determines when higher levels of inequality
increase and when they diminish trust.
Theoretical model
Conceptualising the relationship between income inequality and trust
Rousseau et al. (1998) established that trust consists of three components: (1) a willing-
ness to be vulnerable to the actions of others; (2) confident or positive expectations about
future outcomes; and (3) conditions of interdependence between the two trusting parties.
Only if the trusting party is confident that the party to be trusted will behave positively
will she make herself vulnerable (Mayer et al., 1995). Having positive expectations
about the other party is the necessary precondition for any trust relationship. According
Schulz et al. 3
to Jones and George (1998), developing higher forms of trust depends on the trust experi-
ence which is determined by the interplay of emotions, attitudes and shared values that
are explored through repeated interaction. In line with this conceptualisation of trust, we
will argue that it is not pay inequality per se but rather the perception of inequality, feel-
ings of (un-)fairness, that shape employees’ experience of the social exchange with their
managers and hence their trust relationship.
Research that has shown country-level relationships between higher income inequal-
ity and lower trust has predominantly used the increase in social distance associated with
higher levels of inequality as the theoretical explanation for this relationship (Delhey and
Newton, 2005; Jordahl, 2009; Olivera, 2015; Wilkinson and Pickett, 2010; Yang and
Xin, 2020). Since it is the interaction with others that fosters the trust relationship
(Rousseau et al., 1998; Searle and Dietz, 2012), inequality is said to influence trust nega-
tively. Greater social distance also implies a growing disparity in preferences and (mate-
rial) interests (Olin-Wright, 2015). It is the combination of the lack of interaction and the
divide in interests and preferences that creates different sets of values, beliefs and norms
(Coffé and Geys, 2006). Since there is a ‘natural tendency for people to associate and be
more comfortable with those people who have similar beliefs’ (Rokeach et al., 1960:
161), inequality has a negative effect on trust.
It remains to be seen whether similar relationships will be observed at an organisa-
tional level, because the foregoing theory focuses on explaining trust in people who do
not have personal relationships with each other, while at a workplace level employees do
have an interpersonal relationship with their managers. The perceived social distance
might vary between firms, yet, working for the same company in the same workplace
provides members of the organisation with a common social identity through their shared
group membership (Akerlof, 1997; Ashforth and Mael, 1989). The trust relationship
between employees and managers is therefore shaped by complex organisational and
interpersonal factors that require the application of theories more closely related to the
workplace. Nevertheless, using findings on the country level as a starting point we posit:
Hypothesis 1: Employee trust in managers is lower in workplaces where intra-work-
place pay inequality is higher.
The non-linear relationship between intra-workplace pay inequality and
employee trust
Yet, we have to be cautious in arguing for a linear relationship between pay inequality
and trust. Equity theory (Adams, 1965) posits that the negative consequences of inequal-
ity are contingent on perceptions of unfairness. It is plausible that up to a point workers
regard inequality as fair and that higher pay inequality and higher trust can be compati-
ble. This can happen if higher pay reflects greater levels of skill or effort. Higher mana-
gerial pay may also attract more competent managers who are better at engendering trust
and cooperation. Furthermore, low to moderate levels of pay inequality can signal the
potential for upward mobility and career progression especially if promotion, reward and
recognition principles are transparent (Godechot and Senik, 2015; Pavlova et al., 2018;
Yu and Wang, 2017).
4 Human Relations 00(0)
However, when wages of those at the top of the income distribution continue to rise
relative to the rest of the workforce (Piketty, 2014) and top manager wages are outpacing
their performance (Bertrand and Mullainathan, 2001; Tatton, 2014), an average employee
might start to view pay inequality as unjustified. That is, there is likely to be a threshold
at which workers no longer believe high pay disparity reflects higher contribution or
promotion prospects thus triggering unfairness perceptions and diminishing trust. We
know from country-level studies that the relationship between income inequality and
happiness is inverted U-shaped (Yu and Wang, 2017). Similar patterns are observed at a
firm level in the relationship between perceptions of equity and job satisfaction (Huseman
et al., 1987) as well as between wage inequality and firm performance (Mahy et al.,
2011; Trevor et al., 2012). It therefore follows that the true relationship between pay
inequality and trust is likely to be non-linear, with an inflection point on the probability
distribution of inequality (Wang et al., 2015):
Hypothesis 2: The relationship between intra-workplace pay inequality and employee
trust in managers is inverted U-shaped.
Intra-workplace pay inequality, employee trust in managers and
perception of fairness
Equity theory (Adams, 1965) assumes that fairness is a causal mechanism transmitting
the effect of inequality. Based on meritocratic principles of distributive fairness, equity
theory posits that feelings of inequity or unfairness between employees and managers
arise when the ratio of other employees’ inputs and outcomes is different from the indi-
vidual’s own input–outcome ratio. That is, if other employees receive higher pay although
they perceive to have similar qualities, ceteris paribus, the employee will be in a state of
inequity. The person to be blamed for this unfairness is the employer or those acting on
her behalf, such as the managers – who should establish a fair distribution of pay within
the workplace to maintain equity in the social exchange between employee and employer.
If this is not the case, the employee will feel unfairly treated.
It is this emphasis on the perception of fairness that links pay inequality to employee
trust. Both quantitative (Colquitt et al., 2007; Knoll and Gill, 2011) and qualitative
(Lapidot et al., 2007) studies show that, out of Mayer et al.’s (1995) three factors of
trustworthiness, benevolence and integrity are more important than ability for employ-
ees’ trust in their superiors. The descriptions of benevolence and integrity used are based
on principles of fairness. The importance of organisational fairness is supported by con-
sistent findings in empirical studies, which find distributive, procedural and interactional
justice to be associated with trust in management and superiors (Choi, 2011; Cohen-
Charash and Spector, 2001; Colquitt et al., 2001; DeConinck, 2010). Thus, from an
equity theory perspective, it is not pay inequality per se that affects trust but rather the
feeling of being unfairly treated that arises from the individual employee’s perception of
an unfair distribution of pay. We hence expect:
Hypothesis 3: Employees’ fairness perceptions mediate the relationship between
intra-workplace pay inequality and employee trust in managers.
Schulz et al. 5
So far, we have focused on the role of distributive concerns in the social exchange
between employees and managers, how this affects perceptions of being treated fairly
and as a result influences employee trust in managers. However, it is well established that
whether pay inequality is perceived as positive or negative does not depend on the per-
ception of outcomes alone but also on the perceived legitimacy of inequality (Downes
and Choi, 2014; Shaw, 2014); that is, whether the allocation of outcomes might be justi-
fiable by the presence of procedures that elicit fairness perceptions (Van Den Bos, 2005).
Moderating role of employee collective voice
Employee voice and participation are the primary mechanisms whereby employees have a
‘say’ on workplace matters relevant to them (Budd et al., 2010; Dundon et al., 2020).
Collective voice, historically presented as trade union representation and collective bargain-
ing (Bingham, 2016; Freeman and Medoff, 1984), enables employees to influence the pro-
cess of wage determination thereby affecting pay levels and their distribution (Charlwood
and Forth, 2009; Heery, 2011). Next to reducing pay inequality (Western and Rosenfield,
2011), trade unions attempt to improve the fairness of pay procedures by supporting
employee participation in pay determination, formalising reward procedures, establishing
due mechanisms to resolve possible disputes and providing transparency of the pay process
through monitoring, audits and reviews (Heery, 2000; Rosetti, 2019). These elements bear
close resemblance to Leventhal’s (1980) six criteria for procedural justice: consistency
across time and person, suppression of biases, accuracy of information, correctability of
decisions, representation in decision making and maintenance of ethical and moral stand-
ards. Trade unions’ main tool to achieve this is collective bargaining agreements (Western
and Rosenfield, 2011). Providing a voice to employees increases employees’ perception of
being fairly treated, which in turn has a positive influence on the acceptance of unfavourable
outcome allocations; particularly in situations where individuals have sufficient information
about their own outcomes but limited information about the outcomes of others, as is often
the case with intra-workplace pay inequality (Van den Bos, 2005; Van den Bos et al., 1997).
Based on the assumption that when procedural justice is high people’s positive expec-
tations about future outcomes outweigh the need for immediate outcomes (Walker et al.,
1979), Brockner and Siegel (1996: 395, emphasis in original) argue that ‘it is not proce-
dural justice per se . . . it is the degree of trust engendered by procedural fairness that
interacts with distributive justice to influence reactions to a resource allocation decision’.
It follows that, as the crucial element of trust is the positive expectation about future
outcomes (Rousseau et al., 1998), employee voice mechanisms are likely to improve
perceptions of being treated fairly in the future, which shifts the focus from the current
to the future allocation of pay. We thus expect:
Hypothesis 4a: Employee collective voice positively moderates the relationship
between intra-workplace pay inequality and employee trust in managers.
Hypothesis 4b: Employee collective voice positively moderates the relationship
between intra-workplace pay inequality and employees’ fairness perceptions.
The theoretical model underpinning our hypotheses is depicted in Figure 1.
6 Human Relations 00(0)
To test our theoretical model, we utilise the sixth wave of the Workplace Employment
Relations Study (WERS) – the 2011 WERS – a nationally representative British survey
on employment relations and working conditions. We use two components of the 2011
WERS: the Manager Questionnaire (MQ) and the Survey of Employees (SEQ). MQ data
were collected through an interview with the most senior manager responsible for
employment relations and a self-completion questionnaire on the basic characteristics of
the workplace and workforce. The SEQ was a self-completion questionnaire distributed
to a randomly selected representative sample of up to 25 employees in each workplace.
A total of 2680 workplaces participated in the MQ (a response rate of 46%). Within these
workplaces 21,981 employees completed the SEQ (a 50% response rate). Only full-time
employees working 35 hours or more in an average week were kept in our sample
because part-time workers will have less scope for interaction with managers, and it is
this interaction which is at the heart of our theoretical model. Twenty-eight workplaces
with a zero Gini coefficient were dropped as this is likely to be a measurement error.
Dependent variable: Employee trust. The literature is replete with different measures of trust
(Colquitt et al., 2007). Broadly speaking, scholars tend to operationalise trust along three
dimensions: positive expectations (e.g. Byrne et al., 2012; Clegg et al., 2002; McAllister,
1995); the willingness-to-be-vulnerable (e.g. Knoll and Gill, 2011; Mayer and Davis, 1999;
Mayer and Gavin, 2005); direct questions concerning the extent to which a person, a group
of people or organisations can be trusted (Brockner et al., 1997; Holland et al., 2012).
In the WERS, employees’ perceptions of trust were included in the SEQ using a posi-
tive expectations approach. Employees’ trust in managers was captured by a three-item
five-point Likert-type scale (Cronbach’s alpha (
)=0.88). Similar measures of trust
were utilised in the employment relations literature (e.g. Brown et al., 2015; Innocenti
et al., 2011; Ogbonnaya et al., 2017; Timming, 2012):
Fairness TrustinManagers
Collective Voice
Collective Voice
Figure 1. Theoretical model.
White boxes depict variables of direct effect, grey boxes mediators and black boxes moderators.
Schulz et al. 7
Managers here . . .
1) Can be relied upon to keep their promises
2) Deal with employees honestly
3) Are sincere in attempting to understand employees’ views.
Our measurement of trust reflects two different though correlated and reinforcing
forms of trust. First, interpersonal trust between individuals who are in direct contact,
such as the line manager. Second, organisational trust that is the trust that individuals
have in their institutional environment (Tan and Tan, 2000), represented by the general
Independent variable: Pay inequality. The measurement of pay inequality was derived from
the WERS Management Survey. Managers were asked to indicate the number of employ-
ees in the workplace falling into one of six gross hourly pay bands. These range from less
than £5.93 to £18.01 or more per hour. Following Bryson et al. (2018), we took the
median value of each respondent’s earnings band, except for those in the highest earn-
ings band, which we multiplied by 1.5 because it does not have a ceiling. This returned
the £27.01 per hour boundary of the highest pay band. We used the Gini coefficient as
measurement of pay inequality. The key desirable property of the Gini coefficient is that
it allows for easy interpretation given its values range from 0 (complete equality) to 1
(absolute inequality where one person holds all the income).
Mediator: Employees’ fairness perceptions. Employees’ perception of manager fairness was
measured by a one-item five-point Likert-type scale from the SEQ: ‘Managers here treat
employees fairly.’ Measuring fairness in this way aligns well to our theoretical model that
focuses on whether employees perceive to be treated fairly in the social exchange as an
outcome of equity considerations. It also captures how voice affects employees’ percep-
tion of manager fairness. Van Den Bos (2005) clarifies that although voice is commonly
discussed in relation to procedural fairness, the true crux of it is the feeling of being fairly
treated by having a voice in the process that determines outcome decisions.
Moderator: Collective voice. We used the proportion of employees covered by a collective
bargaining agreement as a proxy for collective voice. In the sensitivity analysis, we
looked at alternative measures of collective voice, namely a dummy variable for trade
union presence at the workplace and a dummy for occupational collective bargaining
coverage, taking the value of 1 if the employee’s occupational group is covered by col-
lective agreements (0 otherwise).
Control variables. We control for tenure, supervisory role, gender, occupation, type of
employment contract (permanent vs. temporary/fixed-term) and employee pay on the indi-
vidual level, and for workplace size, age and legal status (private vs. public/non-profit).
Descriptive statistics for all study variables are reported in Table 1.
8 Human Relations 00(0)
Table 1. Descriptive statistics.
NMean SD Median Min Max Skew Kurtosis SE
Trust 13447 3.31 0.99 3.33 1 5 −0.46 −0.28 0.01
Gini 14694 0.18 0.07 0.18 0.01 0.45 −0.11 −0.37 0.00
Manager fairness 13704 3.39 1.11 4.00 1 5 −0.57 −0.39 0.01
Collective bargaining coverage 14900 3.96 2.75 5 1 7 −0.05 −1.88 0.02
Occupation covered by CB 10755 1.33 0.47 0 0 1 0.72 −1.49 0.00
Supervisory role 13696 1.39 0.48 1 0 1 0.47 −1.78 0.00
Trade union at the workplace 11405 0.630 0.483 1 0 1 −0.539 −1.709 0.005
Gender 13846 1.56 0.49 1 0 1 −0.24 −1.94 0.00
Tenure 13896 3.55 1.31 4 1 5 −0.55 −0.78 0.01
Contract type 13912 0.95 0.21 1 0 1 −4.21 15.72 0.00
Employee pay 13355 555.41 333.65 476 31 1576 1.79 3.08 2.89
Occupation 13536 4.18 2.40 4 1 9 0.69 −0.63 0.02
Workplace age 14270 4.65 1.74 6 1 6 −0.90 −0.69 0.01
Legal status 14900 0.58 0.49 1 0 1 −0.32 −1.90 0.00
Employees (Total) 14694 481.15 1151.98 114 5.00 20,746 0.72 −1.49 0.00
E–M SE 13848 3.56 1.03 4 1 5 −0.60 −0.12 0.01
CB: collective bargaining; E-M SE: employee-manager social exchange.
Schulz et al. 9
We used two different analytical procedures to examine the relationship between pay
inequality and trust. First, we employed a multilevel moderated mediation effect model.
We followed this approach because the 2011 WERS is a hierarchical dataset where
employees are nested within their respective workplaces. Multilevel analysis is appro-
priate for our data because the intra-class correlation coefficient (ICC1) indicated that
roughly 17% of the overall variation in trust can be attributed to differences between
average trust at workplace level. The regression model partitioned variance into level
two (the workplace) and level one (employees). These differences would have been lost
if we had aggregated the data to level two or used workplace fixed effects (Goldstein,
1995; Hox, 1992).
The mediation model in line with Baron and Kenny (1986) is depicted in Figure 2.
This is a 2–1–1 model given pay inequality was measured at level two (workplace) while
other variables in the model were measured at the employee level.
We deployed a random intercept multilevel model to estimate direct and mediated
effects with the full maximum likelihood estimator that produces asymptotically efficient
and consistent estimates and is, in reasonably large samples such as the WERS, robust
against mild violations of regression assumptions (Hox, 1992; Maas and Hox, 2004). If at
least one path of the mediation model is moderated, the whole affect is moderated:
Given that the true relationship between pay inequality and trust could be non-linear
we included a polynomial term in the regression equation. However, for linear regres-
sions to pick up a quadratic effect the non-linearity ought to be clear-cut with as little
variation as possible around the inflection point. Random forest analysis, a class of
machine learning algorithm, has been found to be better at identifying complex non-lin-
ear relationships than traditional forms of regression analysis (Goldstein et al., 2015).
Therefore, we next used random forest analysis to build a predictive model of employee
trust in managers given pay inequality, employee collective voice and other key variables
included in study one.
Perceived Manager
Fairness TrustinManagers
c, c’
Collective Voice
Collective Voice
Figure 2. Multilevel moderated mediation effects model.
10 Human Relations 00(0)
Random forest (RF) is a widely used machine learning algorithm. It represents an
ensemble algorithm of simple predictive models (decision trees) built by resampling
(bootstrapping) a random selection of features (Svetnik et al., 2003). RF algorithmically
selects cut-off points to grow decision trees where the effect of a predictor on an outcome
is estimated at every splitting point. The splitting procedure is repeated multiple times
with intermediate solutions, thus producing an ensemble (‘forest’) of decision trees. The
random forest’s prediction is the average of fitted decision trees based on the random
split of the dataset into the training and test subsets.
To derive the direction and magnitude of the relationship between ‘x’ and ‘y’, we used
partial dependence plots (PDP), which are similar to marginal effects in linear regres-
sion. That is, PDP show the relationship between an independent variable and the out-
come holding other features in the model constant. In addition to PDP, we use individual
conditional expectation (ICE) plots which produce a prediction line per observation in
the sample. This is a useful addition because PDP can mask heterogeneous effects that
occur among some groups of respondents but not others. We employed a variant of ICE
called centred ICE plots. Such plots have a thick line in the middle to give an overall
impression as to where a central point of individual curves lies.
The online Appendix contains mathematical notations for the regression models, RF,
PDP and ICE alongside sensitivity analyses. R scripts used to run the analysis can be
obtained from the authors. The data can be obtained from the UK Data Archive.
Measurement model
Confirmatory factor analysis was conducted to assess validity and reliability of the meas-
urement model. The measurement model comprised three latent variables: trust, fairness
and a measure for the exchange relationship between employees and managers for sen-
sitivity analysis (see Figure 3). To standardise results, the variance for both manifest and
latent variables was fixed at 1. Initially, a theoretical measurement model was tested
wherein individual items were allowed to load on their hypothesised latent constructs.
This model was then compared to alternative specifications.
As can be seen in Table 2, the overall fit of the two-factor measurement model was good
as all key indicators (CFI = 0.99, TLI = 0.99, RMSEA = 0.04, SRMR = 0.01) showed a
good fit between the theoretical model and the data (Hu and Bentler, 1999). All latent vari-
ables had sufficient discriminant validity, and alternative specifications fared worse than
the theoretical model.
Common method variance
There is a possibility of common method variance in our data given that trust, fairness and
social exchange items were all measured by Likert-type scales at employee level (Podsakoff
et al., 2003). We used Lindell and Whitney’s (2001) marker variable test to check for com-
mon method variance. The following variable was used as a marker: ‘How well do the work
skills you personally have match the skills you need to do your present job?’ As can be seen
in Table 3, the correlation between the marker variable and the outcome items is the lowest
(0.02) among all correlations between the outcome and other study variables.
Schulz et al. 11
Although the correlation coefficient was statistically significant, this is not uncom-
mon as p-values are generally low in large samples such as the WERS. The main takea-
way from the marker variable test is that the marker variable bears no meaningful
correlation of the items of interest, ranging from as little as 0.02 to no higher than 0.04.
Hence, the element of the observed correlation stemming from common method vari-
ance (CMV) is relatively small.
After partialling-out the effect of the marker (see Lindell and Whitney, 2001), the cor-
relation between all criterion variables slightly decreased, yet they are still statistically
and quantitatively significant (Table 4). This shows that even after controlling for CMV
0.83 0.75
0.93 0.97 0.96 1.11 1.03
Figure 3. Path diagram of latent variables.
Table 2. CFA model fit indices.
Model 0.998 0.994 0.041 0.006
Alternative 1 0.992 0.984 0.085 0.013
Alternative 2 0.992 0.984 0.085 0.013
1 = Fairness and Trust items load onto one factor; 2 = All items load onto a single factor.
CFA: confirmatory factor analysis; CFI: Comparative Fit Index; TLI: Tucker-Lewis Index; RMSEA: root mean
squared error of approximation; SRMR: standardised root mean squared residual.
12 Human Relations 00(0)
the true correlation between the criterion and the outcome variables is still strongly posi-
tive and significant.
Is there a direct relationship between pay inequality and trust?
The first question of interest is whether pay inequality is negatively associated with trust
in managers. The results in Table 5 suggest a positive relationship between the Gini coef-
ficient and trust in managers (β = 0.88, p-value < .001). After adding control variables,
the size of the association decreased, but stayed significant and positive (Gini: β = 0.50,
p-value < .01; logGini: β = 0.05, p-value < .05). This contradicts Hypothesis 1.
Is the relationship between pay inequality and trust non-linear?
Having established a statistically significant association between pay inequality and
employee trust in managers, we turn to Hypothesis 2 and examine the possibility of this
relationship being curvilinear. Following the empirical strategy outlined above, we first
added a quadratic term to the regression equation. This yielded non-significant results as
shown in Table 5 (see model 4; p-value = .73). Therefore, using regression analysis we
have not been able to corroborate Hypothesis 2.
Acknowledging that linear regression can overlook genuine non-linear patterns in the
data, we turned to RF. We estimated a model with pay inequality as a key predictor and
Table 3. Correlation matrix of latent variable items with marker variable.
Marker Reliance Sincerity Honesty Fairness SE
Marker 1
Reliance −0.02*** 1
Sincerity −0.02* 0.67*** 1
Honesty −0.03*** 0.61*** 0.70*** 1
Fairness −0.04*** 0.56*** 0.62*** 0.61*** 1
E-M SE −0.03*** 0.47*** 0.52*** 0.45*** 0.55*** 1
*p<0.1, **p<0.05, ***p<0.01; E-M SE: employee-manager social exchange.
Table 4. Partial correlation matrix.
Reliance Sincerity Honesty
Reliance 1
Sincerity 0.65*** 1
Honesty 0.60*** 0.68*** 1
Fairness 0.54*** 0.61*** 0.60***
E-M SE 0.46*** 0.51*** 0.44***
*p<0.1, **p<0.05, ***p<0.01; E-M SE: employee-manager social exchange.
Schulz et al. 13
Table 5. Regression results for the direct relationship between pay inequality and trust.
Dependent variable: Trust in managers
(1) (2) (3) (4)
Gini 0.877***
logGini 0.054**
Gini-squared 0.643
Tenure −0.086***
Supervisory role 0.150***
Gender (Male = 1) −0.040**
Type of contract
(Permanent = 1)
Employee pay 0.000***
SOC2 −0.192***
SOC3 −0.215***
SOC4 −0.198***
SOC5 −0.400***
SOC6 −0.138***
SOC7 −0.127**
SOC8 −0.407***
SOC9 −0.285***
Workplace age 0.001
Employees (total) −0.000***
Legal status (1 = private
for profit)
Constant 3.187***
Observations (employees) 13,447 11,925 11,925 13,447
Observations (workplaces) 1685 1603 1603 1685
R2 (level 1) 0.004 0.077 0.077 0.004
R2 (level 2) 0.161 0.116 0.116 0.161
*p<0.1, **p<0.05, ***p<0.01; SOC: Standard Occupational Classification System. Numbers in brackets are
standard errors.
14 Human Relations 00(0)
trust in managers as an outcome. Variable importance scores and complete RF outputs can
be found in the online Appendix. Figures 4 and 5 present the PDP and ICE plots respec-
tively for the effect of intra-firm pay inequality on employee trust in managers. PDP shows
the average marginal effect of pay inequality on trust, while the centred ICE plots visualise
predictions for every observation in the data. PDP points to a clear-cut non-linear relation-
ship between pay inequality and trust, with a turning point ~0.3. When the Gini coefficient
is greater than this the previously positive relationship between pay inequality and trust
turns negative. This is mirrored in the ICE plot, though it shows some variation around the
inflection point (hence, a visibly small size of the U-shaped effect). Overall then, RF sup-
ports the curvilinear effect in accordance with Hypothesis 2.
Do fairness perceptions mediate the relationship between pay inequality
and trust?
The results in Table 6 show that all required steps for a successful mediation are fulfilled.
Both the direct association between pay inequality and trust, and the association between
Figure 4. Partial dependence plot (Gini – Trust).
Figure 5. Conditional expectation plot (Gini – Trust).
Schulz et al. 15
pay inequality and fairness are positive and significant. Moreover, after including fair-
ness when regressing trust on pay inequality, the relationship between fairness and trust
was statistically significant (β = 0.69, p-value < .001) while the effect of pay inequality
diminished in size and turned non-significant (β = 0.151, p-value = .093). Including
fairness in the model increased the R2 from around 0.2 to 0.65. Hypothesis 3 is thus sup-
ported: employees’ perception of manager fairness mediates the relationship between
pay inequality and employee trust in managers.
Moderating effect of collective bargaining
As the results in Table 7 regression (1) suggest, the association between pay inequality
and trust in managers is positive and significant at a 0.1% level for collective bargaining
coverage (β = 0.214, p-value < .001). Hypothesis 4a was thus supported: employee col-
lective voice positively moderates the association between pay inequality and employee
trust in managers.
The marginal effects in Figure 6 illustrate the importance of collective employee
voice for the relationship between pay inequality and trust. In workplaces where no
employee is covered by collective bargaining agreements, trust falls slightly as pay ine-
quality increases while it increases in workplaces with a higher proportion of employees
covered by collective bargaining.
Results for the moderation effect of collective bargaining in the relationship between
pay inequality and fairness are displayed in Table 7 regression (2). Almost identical to its
relationship with trust in managers, collective bargaining positively moderates the rela-
tionship between pay inequality and perceived manager fairness. These findings support
Hypothesis 4b. The marginal effects are illustrated in Figure 7.
Table 6. Regression results for the mediating effect of perceived manager fairness.
Trust Fairness Trust
(1) (2) (3)
Perceived manager fairness 0.689***
Gini 0.500***
Constant 3.875***
Observations (employees) 11,925 12,143 11,874
Observations (workplaces) 1603 1603 1603
R2 (level 1) 0.077 0.074 0.642
R2 (level 2) 0.116 0.083 0.015
Control variables included. *p<0.1, **p<0.05, ***p<0.01. Numbers in brackets are standard errors.
16 Human Relations 00(0)
Assuming the true relationship between pay inequality and trust is curvilinear, we
tested whether the moderating effect of employee collective voice manifests in RF. We
used the same RF algorithm except for collective bargaining coverage that we used to
split the data into two groups comprising organisations that are covered and not covered
by collective bargaining agreements. The PDP by collective bargaining is reported in
Figure 8, which demonstrates that the effect of pay inequality on trust is broadly positive
Table 7. Regression results for the moderating role of collective employee voice in the
relationship between pay inequality and trust and between pay inequality and fairness.
Trust Fairness
(1) (2)
Gini −0.390 −0.533*
(–0.283) (0.295)
Collective bargaining coverage −0.022*** −0.013*
(0.006) (0.006)
Gini x Collective bargaining coverage 0.214*** 0.211***
(–0.060) (–0.063)
Constant 4.049*** 4.172***
(–0.072) (0.075)
Observations (employees) 11,925 12,592
Observations (workplaces) 1603 1606
R-Squared (level 1) 0.085 0.076
R-Squared (level 2) 0.113 0.082
Control variables included. *p<0.1, **p<0.05, ***p<0.01. Numbers in brackets are standard errors.
Figure 6. Marginal effects for the moderating effect of collective bargaining on the relationship
between pay inequality and trust.
Schulz et al. 17
(except the inflection point) in workplaces covered by collective agreements, but that
does not hold among non-covered workplaces. This lends further support to the moderat-
ing effect of collective voice even when taking into account the non-linear relationship
between pay inequality and trust.
We also investigated whether we still observed a mediating role for perceived fairness
in the RF analysis. Results here were in line with the outcomes of the multilevel model
reported above. The plots from this analysis are included in the online Appendix.
Figure 7. Marginal effects for the moderating effect of collective bargaining on the relationship
between pay inequality and perceived fairness.
Figure 8. Partial dependence plot (Gini – Trust, by collective bargaining coverage).
18 Human Relations 00(0)
Sensitivity analysis
Alternative union voice measures
As described in the methods section, we have included two additional measures of union
voice to test for the sensitivity of our results. The results for both alternative union voice
measures, shown in Table 8, are statistically significant and in line with the findings above
on the moderation and moderated mediation analysis of collective bargaining coverage.
An employee-manager social exchange measurement
We have also included a measure that captures employees’ perception of the employee–
manager relationship in the workplace, to test whether our model is still valid when
including a parallel mediator that captures the social exchange between employees and
managers (‘In general, how would you describe the relations between managers and
employees here?’). Since trust is rooted in the social exchange between managers and
employees, we would expect the employee-manager relationship to mediate the pay
inequality–trust relationship.
The results in Table 9 support this. In line with our findings on perceived fairness, all
steps for a successful mediation are fulfilled. Moreover, perceived fairness remained
Table 8. Sensitivity analysis: Alternative union voice measures.
Trust Trust Fairness Fairness
(1) (2) (3) (4)
Gini −0.264 0.389* −0.148 0.202
(0.257) (0.214) (0.278) (0.225)
Trade union presence −0.139*** −0.116***
(0.028) (0.030)
Occupational group covered −0.086*** −0.088***
(–0.030) (–0.032)
Gini x Trade union presence 1.431*** 1.163***
(0.330) (0.360)
Gini x Occupational group
0.905** 0.967**
(0.385) (–0.407)
Constant 3.995*** 3.884*** 4.000*** 3.948***
(0.080) (0.074) (0.088) (0.081)
Observations (employees) 9757 9495 9906 9670
Observations (workplaces) 1562 1514 1562 1516
R2 (level 1) 0.079 0.074 0.074 0.072
R2 (level 2) 0.114 0.115 0.088 0.080
Control variables included. *p<0.1, **p<0.05, ***p<0.01. Numbers in brackets are standard errors.
Schulz et al. 19
statistically significant (p-value < .0001) when adding the social exchange measure and
the social exchange measure added to the explanatory power of our model (R2 = 0.73).
Robustness of cross-sectional mediation analysis
A significant limitation of our mediation analysis is that it is applied to cross-sectional data.
This means that our results cannot speak for the temporal sequences of causal effects
underpinning our model. Nor are we able to completely eliminate omitted variable bias.
However, we conducted a sensitivity analysis with respect to the mediator–outcome rela-
tionship to probe the likelihood of violating the sequential ignorability assumption which
posits that, conditional on observed covariates, there are no unmeasured confounders at
every step of a causal mediation chain (Imai et al., 2010). The sensitivity function com-
putes the true average mediated effect at different levels of a sensitivity parameter ‘rho’,
which quantifies the violation of the sequential ignorability assumption. In addition to the
sensitivity parameter, the output shows the product of the proportion of variance of a medi-
ator and an outcome explained by an unobserved confounding variable at which the 95%
confidence interval for mediated effects turns zero. The corresponding sensitivity coeffi-
cient ‘rho’ at which the mediation effect turns zero with 95% chance (confidence interval
= [–0.007; 0.094]) is 0.8. Figure 9 visualises this. The product of R-squared coefficients
for the mediation and outcome regressions (R^2_M*R^2_Y) with a confounder at which
the average mediation effect turns zero was equal to 0.64. This implies that to overturn a
mediation effect observed in our data a confounder would have to explain 80% of the
Table 9. Sensitivity analysis: The mediating effect of the social exchange relationship between
employees and managers.
Trust E–M SE Trust
(1) (2) (3)
E-M SE 0.408***
Gini 0.500***
Perceived fairness 0.420***
Constant 3.875***
11,925 12,259 11,808
1603 1604 1599
R2 (level 1) 0.077 0.070 0.726
R2 (level 2) 0.116 0.135 0.005
Control variables included. *p<0.1, **p<0.05, ***p<0.01. Numbers in brackets are standard errors. E-M SE:
employee-manager social exchange.
20 Human Relations 00(0)
originally explained variance of fairness perception and 80% of variance of employees’
trust in managers. While not impossible, this and other similar scenarios are unlikely to
materialise. These results increase our confidence in the outcomes of our analysis, though
in the absence of longitudinal data and experimental or quasi-experimental evidence we
refrain from making stronger causal claims.
At the level of societies, there is robust evidence that greater income inequality results in less
trust between citizens. This article was motivated by a desire to understand whether we see
this relationship replicated within organisations. This is a novel topic which has not previ-
ously been studied in the literature on trust in organisations. It is important considering the
significant share of intra-firm pay inequality in the increase in overall income inequality
levels on the one hand (Barth et al., 2016; Card et al., 2013; Song et al., 2019), and the posi-
tive outcomes associated with employee trust on the other hand (Brown et al., 2015; Sharkie,
2009; Tzafrir, 2005). Our results suggest that, contrary to findings on the macro level, the
relationship between intra-workplace pay inequality and trust is initially positive. Using
machine learning techniques, we have shown that this positive association only holds for
low and moderate levels of inequality. Once pay inequality passes a threshold (Gini coeffi-
cient > 0.3) its relationship with trust turns negative. This threshold is very close to a broadly
accepted borderline of ‘adequate’ inequality, 0.3–0.4 (OECD, 2011) and to previous research
that linked a country-level Gini coefficient above 0.3 with poor health outcomes (Kondo
et al., 2009). To put this number into perspective, a Gini coefficient of 0.3 is equivalent to
the level of income inequality in Germany or France, and only slightly higher than inequal-
ity in ‘low-inequality’ countries such as Finland, Sweden, Norway and Denmark (Gini coef-
ficient ~0.28). Crucially, the identified value at which the positive effect of inequality on
trust breaks down is far below the current level of inequality in the United Kingdom (Gini
coefficient = 0.37) and substantially lower than inequality in other OECD countries like the
USA (0.39), Mexico (0.46) or South Africa (0.62) (OECD, 2020).
Figure 9. Sensitivity plot mediation analysis.
Schulz et al. 21
This study revealed that it is the embodied notion of perceived fairness in the social
exchange between employees and managers that matters for the relationship between
pay inequality and employee trust in managers. While individual fairness perceptions
have been linked to employee trust in managers in the past (Choi, 2011; Cohen-Charash
and Spector, 2001; Colquitt et al., 2001; DeConinck, 2010), we demonstrated that the
relationships between pay inequality, trust and fairness perceptions are moderated by
organisational factors – something that according to Nienaber et al. (2015) has received
less attention in previous research. Specifically, the moderating role of collective voice
has been tested based on the assumption that trade unions, through collective agree-
ments, increase transparency and fairness of pay determination (Metcalf et al., 2001).
The results of the present study have implications for theory, research methodology
and practice.
Theoretical implications
Broadly speaking, our findings support the role of fairness perceptions in understanding
outcomes of intra-workplace pay inequality (Adams, 1965; Van Den Bos, 2005). This
study extends intra-organisational pay inequality research in two fundamental ways.
First, previously unobserved non-linear patterns in the relationship between pay inequal-
ity, perceived fairness and trust imply that a degree of pay inequality can be associated
with positive employee attitudes (and perhaps, by extension performance) but only up to
a point. This chimes with studies of the relationship between pay inequality, productivity
and performance, which found similar curvilinear relationships (Mahy et al., 2011;
Trevor et al., 2012). The non-linear association between pay inequality and fairness per-
ceptions identified in this article is important because, contrary to previous research
which argued that positive effects of pay inequality are explained by theories of self-
interest (Lazear and Rosen, 1981) and that negative effects are explained by theories of
fairness (Akerlof and Yellen, 1990), our theorisation and results suggest that fairness
considerations can explain both positive and negative reactions to pay inequality.
It is plausible then that the underlying mechanisms by which inequality impacts trust
in the workplace are different from forces that are at play in the society as a whole
(Sandel, 2012). Workplace relationships are characterised by social as well as economic
exchange relationships that are by definition interpersonal, affected by a multitude of
organisational and individual factors. Hence, being in relatively close proximity to each
other and their managers, employees can construe pay inequality as fair insofar as it
reflects greater responsibilities and contributions of managers. The inflection point in
this relationship (Gini coefficient ~0.3) is crucial in that it indicates how far the inequal-
ity can stretch before turning unfair, thereby disrupting established relationships in the
workplace. This explanation is in line with Adams’ (1965) original theory on inequity in
social exchanges and meritocratic fairness beliefs.
The second theoretical implication of this study is that the inverted U-shaped relation-
ship between pay inequality and trust in managers varies depending on the organisational
context in which pay differentials take place, thus supporting the idea of differential, con-
tingent human resource management systems (Apospori et al., 2008; Clinton and Guest,
2013). One such contextual factor is employee collective voice. Our empirical findings
22 Human Relations 00(0)
demonstrate that the positive slope of the relationship between pay inequality, trust and
fairness is found in workplaces with high levels of collective bargaining coverage. This
relates to an established, yet recently neglected, strand of research that posits the breadth
and depth of employee voice mechanisms as a key driving force for transparency and fair-
ness in pay outcomes (Heery, 2000; Metcalf et al., 2001). Our findings confirm that if
employees have a say on workplace matters relevant to them and are able to influence the
process of pay determination through their representatives, they will perceive pay out-
comes in a more positive light relative to workplaces where the channels of collective
voice are absent. However, employee voice is not a panacea for inequality and unfairness
since our findings revealed that the curvilinear relationship between pay inequality, fair-
ness perceptions and trust persists in workplaces covered by collective agreements. This
is a crucial finding that puts new perspective on the ‘fair process effect’ (Folger et al.,
1979; Van Den Bos, 2005) at the workplace level, in that it shows that voice alone might
only result in fairness perceptions and the acceptance of outcome decisions as long as
outcome inequality does not pass a certain threshold (Gini coefficient > 0.3).
Methodological implications
This study presented a novel methodological approach where we combined traditional meth-
ods of regression analysis with machine learning algorithms. Machine learning has been
instrumental in our attempt to uncover non-linear patterns in the relationship between pay
inequality and trust in managers. The reason we turned to a random forest model is because
it is a data-driven non-parametric technique that relaxes many stringent assumptions behind
linear and polynomial regression models. Using recent advancements in machine learning,
notably graphical methods of analysing the relationship between dependent and independent
variables, we were able to unpick a non-linear, non-monotonous relationship between pay
inequality and trust invisible to regression analysis but consistent with theory.
There are two main takeaways from our methodological approach. First, our study is a
warning against the blind use of linear regression models and oversimplification of the out-
comes of regression analysis. Had we relied exclusively on regression analysis, the interpre-
tation of our results would have been different and potentially misleading. Second, we
encourage scholars to utilise machine learning techniques more often, especially in studies
that look at complex, multidimensional phenomena and use large datasets. This has been
recognised in many academic disciplines including medical sciences and economics; it is
time for human resource management and employment relations scholars to follow suit.
Practical implications
One of the key lessons for human resource (HR) practitioners is that pay inequality levels
are likely to affect the relationship between employees and managers. This is important
because both high levels of trust and fairness have been linked to employee work attitudes
and outcomes such as commitment, satisfaction, extra-role behaviour and increased pro-
ductivity (Brown et al., 2015; Sharkie, 2009; Tzafrir, 2005). HR managers should therefore
consider carefully the within-company pay distribution when designing compensation sys-
tems. Analysis of industry pay benchmarking surveys can be used to monitor whether
Schulz et al. 23
levels of within-company inequality are greater than industry norms (and therefore likely
to be perceived as unfair). Managers might also use employee appraisal and performance
management discussions to understand the extent to which their direct reports think their
pay is fair and to clearly explain pay decision criteria in order to try to enhance perceptions
of fairness. This can be explicitly encouraged through appraisal/performance management
policies. The impact of these actions can be monitored at a company and business unit level
by including questions that measure the extent to which employees think their pay is fair in
staff attitudes surveys. This could be done by adding questions asking employees whether
they view their pay to be fair in general, compared to others, and whether they feel that
overall there seems to be a balance between employees’ inputs and outcomes, as well as
whether they find they have enough say in pay matters. Employees’ perceptions of pay
fairness can also be monitored through formal consultation channels (e.g. works councils
and consultations as well as negotiations with trade unions).
Focusing on giving employees a voice to counter the potential negative effects of high
degrees of pay inequality is a balancing act that demands caution and has its limits. At
moderate levels of inequality fairness considerations from voice opportunity seem to
override the perceptions of the allocation of outcomes. Formal rules and procedures,
transparency, the opportunity for corrective measures – all parts of collective labour
agreements – signal the employee fair and trustworthy behaviour of managers. With this
in mind, practitioners should be aware of the potential positive effect of collective
employee voice through collective bargaining on the quality of employee–manager rela-
tionships; an important aspect in times of declining union voice (Bingham, 2016).
Although fairness and trust are initially lower in workplaces where unions play a strong
role in pay matters, this is most likely because of the underlying working conditions
(Bessa et al., 2020). Overall, our results suggest that giving employees a say can help to
increase acceptance of pay differentiation but only up to a point. We identified a thresh-
old for sustainable levels of pay inequality in the workplace (i.e. Gini ~0.3), which can
serve as an indicator for HR practitioners. When developing and implementing pay sys-
tems and structures, HR officials should be aware of these organisational factors and
limitations that can have a profound impact on workplace employment relations.
Limitations and future research
The strengths of this research are the high quality, nationally representative, matched
employer–employee data on which it was based and the use of novel methods to uncover
important non-linear relationships. Against these strengths must be set some potential
weaknesses. Our analysis was based on cross-sectional data. Panel data would allow us to
examine relationships between changes in pay inequality and its effects on trust, allowing
stronger inferences about causality to be drawn. We did consider attempting such analysis
with the WERS panels, but the long time periods between waves mean that it would be
hard to make causal inferences because changes to pay inequality and trust would in all
likelihood be accompanied by other significant but unobserved changes to the workplace.
Our measure of pay inequality is likely to underestimate the actual level of pay inequality
in the workplaces because of the way in which WERS measures pay. Moreover, our trust
variable only captures the positive expectation component of trust, so it lacks
24 Human Relations 00(0)
the willingness-to-be-vulnerable element. Therefore, while our findings are novel and
compelling, further testing with better measures and longitudinal data has the potential to
provide more precise estimates and stronger causal inferences of the relationships we have
The authors acknowledge the Department of Business, Innovation and Skills, the Economic and
Social Research Council, the Advisory, Conciliation and Arbitration Service and the National
Institute of Economic and Social Research as the originators of the 2011 Workplace Employee
Relations Survey data, and the Data Archive at the University of Essex as the distributor of the
The authors received no financial support for the research, authorship and/or publication of this
Felix Schulz
Danat Valizade
Andy Charlwood
Supplemental material
Supplemental material for this article is available online.
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Schulz et al. 29
Felix Schulz is a Doctoral Researcher at the Work and Employment Relations Division at the
University of Leeds. His research interests span from income inequality and trust to fairness percep-
tions, values, voice and environmental labour studies. From 1 February 2021 he will be a Research
Fellow at the Digital Futures at Work Research Centre (digit). [Email:]
Danat Valizade is an Associate Professor of Quantitative Methods at the Work and Employment
Relations Division at the University of Leeds. His research interests coalesce around the changing
nature of work, labour market polarisation, disparities in the quality of work and worker well-
being. He is particularly interested in the use of advanced statistical techniques and machine learn-
ing algorithms to foster a better understanding of causal mechanisms underpinning contemporary
tendencies in work and employment. Danat has published widely and his work has appeared in the
British Journal of Industrial Relations, the British Journal of Sociology, the Human Resource
Management Journal and the International Journal of Human Resource Management. [Email:]
Andy Charlwood is a Professor of Human Research Management at the Work and Employment
Relations Division at the University of Leeds. His main research interests are in the areas of job
quality, well-being at work, HR and people analytics. He is interested in the ways in which analyt-
ics and the digitisation of people management are changing HRM. Andy’s work has been pub-
lished in Work, Employment and Society, the Human Resource Management Journal, Human
Relations, the British Journal of Industrial Relations, the Journal of Industrial Relations and the
Cambridge Journal of Economics. [Email:]
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... A related phenomenon concerning management attitudes towards worker representative voice is the importance of trust-building between the parties (e.g. Kougiannou et al., 2015;Kougiannou et al., 2021;Schulz et al., 2021;Timming, 2009). However, underplayed in the trust literature is the influence of managerial prerogative (control) and managers' attitudes towards employee representatives. ...
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Unionized workers tend to be less satisfied with their jobs than their non‐union counterparts. Despite 40 years of research that has sought to explain this phenomenon, the causes of this relationship are not fully understood. Drawing on nationally representative panel data from the UK, this study uses quasi‐experimental methods to compare how the job satisfaction of union members and their non‐union counterparts changes in response to an exogenous event. Results suggest that working conditions rather than the behaviour of unions are the more likely cause of union member job dissatisfaction.
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Two studies investigated the cross‐temporal and cross‐sectional associations between income inequality and interpersonal trust in China. In Study 1, a cross‐temporal meta‐analysis involving 141 studies (N = 64,853) found that Chinese college students’ scores on the Interpersonal Trust Scale (Rotter, 1967) decreased 0.54 SD from 1998 to 2016, and that the decline in interpersonal trust across birth cohorts was explained by earlier income inequality index in China. In Study 2, a cross‐regional analysis showed that Chinese citizens in provinces with more income inequality (vs. less inequality) perceived the local government to be less trustworthy and, in turn, reported lower levels of interpersonal trust. These findings contribute to the understanding of the rising income inequality as an explanation for the waning interpersonal trust in China, and point to a crucial channel connecting income inequality with interpersonal trust.
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Trade unions have been analysed quantitatively primarily in their role as vested interest organisations, attempting to quantify the excludable benefits they provide to members rather than examine their wider impact in an institutional context. Power resource theory acknowledges unions as social agents but assumes the willingness to oppose neoliberalism is constant, limited only by scarce power resources. Whilst true in general terms, this fails to explain trends of increasing labour market dualism in resource‐rich industrial relations regimes. This article examines social solidarity as a union power resource, measuring the impact of trade union membership on social attitudes of solidarity. Data were collected from the 2016 European Social Survey for 18 countries, grouped into five distinct industrial relations regimes. The findings suggest that, at European level, union membership still has a significant effect on all dimensions of social solidarity, but these relationships vary significantly across industrial relations regimes.
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Literature has argued that income inequality crowds out trust. However, whether income inequality makes people less trusting depends on how they perceive income inequality within their personal social context and social cognition. In this paper we therefore conjecture that the relationship of income inequality to trust depends on how income inequality affects inequality of life satisfaction. If life satisfaction inequality is high, distrust is generated among the least happy. This will increase polarization and the risk of rebellion, thereby also affecting trust among the happier people. Thus, life satisfaction inequality may be an essential factor in the relationship between income inequality and trust. In previous literature, the potential mediating role of life satisfaction inequality in the relationship between income inequality and social trust has not yet received attention. We test our model by panel analysis on 25 OECD countries in the period 1990–2014. The panel analysis shows that income inequality increases life satisfaction inequality and that both income inequality and life satisfaction inequality have a significant negative impact on social trust. Mediation tests show complementary mediation: besides the direct negative effect of income inequality on trust, we find an indirect effect mediated by life satisfaction inequality. This indirect effect counts for 20% of the total effect of income inequality on trust. Our results imply that policy options for increasing trust are not limited to countering income inequality, but can also include policy measures that directly reduce inequality of life satisfaction.
We use a massive, matched employer-employee database for the United States to analyze the contribution of firms to the rise in earnings inequality from 1978 to 2013. We find that one-third of the rise in the variance of (log) earnings occurred within firms, whereas two-thirds of the rise occurred due to a rise in the dispersion of average earnings between firms. However, this rising between-firm variance is not accounted for by the firms themselves but by a widening gap between firms in the composition of their workers. This compositional change can be split into two roughly equal parts: high-wage workers became increasingly likely to work in high-wage firms (i.e., sorting increased), and high-wage workers became increasingly likely to work with each other (i.e., segregation rose). In contrast, we do not find a rise in the variance of firm-specific pay once we control for the worker composition in firms. Finally, we find that two-thirds of the rise in the within-firm variance of earnings occurred within mega (10,000+ employee) firms, which saw a particularly large increase in the variance of earnings compared with smaller firms.
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