The purpose of this paper is to examine the impact of pay diversity between groups, for example, across competing workplace teams.
In Study I, 60 future managers from Newcastle, Australia, were paid either $1 or $2 to work on an identical intrinsically motivating task, either on an individual basis or as members of pay‐diverse groups. In Study II, with 84 future managers in Darwin, Australia, the $1/$2 group pay dichotomy was made more realistic, by positioning the pay either at the bottom ($1) or top ($2) rungs of a pay ladder, or embedding it within a wider pay scale ($1 at a first, and $2 at the second tertile).
In Study I, between individually paid workers, both below‐ and above‐average payment were linked to low intrinsic motivation, whereas between groups, those in the higher pay bracket remained more motivated compared to their lower‐paid group counterparts. In Study II, when pay was polarised, intrinsic motivation was higher in the higher‐paid compared to lower‐paid groups; but when pay was embedded, this comparative advantage dissipated.
Taken together, Studies I and II suggest that pay diversity across groups will de‐motivate both lower‐ and higher‐paid groups, except perhaps when a group tops the pay ladder.
