How Important Is Fair Pay?

A recent survey by professional services firm PwC, in partnership with the London School of Economics, finds a significant intergenerational difference of opinion when it comes to fair pay and what constitutes ethical behavior around pay, with the younger population wanting stronger protection for the less well-off, compared to the older generation who are more likely to put faith in the effectiveness of market outcomes to create a fairer society.

Survey data, which is based on feedback from 1,123 executives around the world, shows remarkable consistency across a range of demographic factors such as gender, territory, and earnings levels.

Age Matters

However, age is the one significant differentiator. Those under 40 are far more likely to believe that distribution of wealth should lead to moral outcomes, with all members of society receiving an income that is sufficient for them to lead a dignified life.
By contrast, survey respondents over 50 believe talented people deserve to receive income in line with their contribution and that market efficiency is important in determining how income should be allocated.
“Fairness is a morally and politically loaded term and means different things to different people. But questions about fairness, and the role companies have to play in this, are not going away any time soon. Demographic factors generally do not predict attitudes to fairness. But the major exception to this is age, with our survey revealing almost 50 percent of over-65s identified themselves most strongly with pro-market principles, while less than a third of under 35s did the same,” said Scott Olsen, PwC partner and global rewards leader.
“The findings demonstrate that there is no single catch-all principle. Views of distributive justice are multidimensional and complex. There is much more to fairness than equality. Companies must therefore develop a much fuller narrative on what they mean by fairness and how they are delivering on that for employees, or risk the debate being hijacked by a one-dimensional view of fairness based on pay ratios.”

Company Responsibility

Those surveyed also do not subscribe to the view that the role of companies is to make money and of the state to redistribute it.
Instead, they think that companies have a broadly equal responsibility in providing a fair pay structure among their employees. Companies are seen not to live outside of, but to be very much a part of, society and are expected to act justly.
But companies, as well as societies, are not always living up to people’s expectations of them. In general, one-quarter to one-third of people surveyed feel that companies are not delivering principles of fairness that they deem to be important.
For example, the principle around equal opportunity, where market competition is seen as fair game, so long as there is a level playing field, is the principle where there is the biggest gap between aspiration and reality. Forty percent of respondents consider equal opportunity to be important but they do not consider the principle to be implemented in their society.
“There is a tricky balance to strike. Markets matter and companies that ignore the pay rates set by the market risk becoming uncompetitive in terms of cost or quality of talent. But at the same time, how companies operate across the developed world is being challenged, and will become more so as automation takes its course,” said Tom Gosling, PwC rewards partner.
“Fair pay, and the ethics behind it, is an important part of rebuilding trust in business. But there is also an opportunity to create a more engaged workforce with benefits for long-term value and productivity. Companies should therefore consider their perspectives on this debate and look to figure out exactly what fairness means for them.”