Academic journal article Journal of Small Business Strategy

Felt Fair Pay of Small to Medium-Sized Enterprise Owners in Finland and Latvia: An Examination of Jaques' Equity Construct*

Academic journal article Journal of Small Business Strategy

Felt Fair Pay of Small to Medium-Sized Enterprise Owners in Finland and Latvia: An Examination of Jaques' Equity Construct*

Article excerpt

ABSTRACT

This study tests a portion of Jaques' theory of equitable payment, using two samples of small to medium-sized business owners in Finland and Latvia. Results support Jaques' proposition about who would be satisfied with their pay level and who would be dissatisfied.

INTRODUCTION

Compensation has long been a topic of interest to employees and employers alike. In fact, the use of compensation as a motivator has been traced to antiquity (Peach & Wren, 1992). The concept of an employment relationship implies that employees work in exchange for some reward, and this reward is often monetary compensation (Brockner, 2002). Thus, pay satisfaction has emerged as a popular variable for use in organizational research (for reviews, see Carraher, Buckley, & Carraher, 2002; Heneman, 1985; Heneman & Schwab, 1979; Lawler, 1971, 1981; Miceli & Lane, 1991; Rynes & Gerhart, 2003). Pay satisfaction exhibits significant relationships with organizationally important outcomes such as absenteeism (Weiner, 1980), turnover intentions (Griffeth

Gaertner, 2001), perceived organizational attractiveness for job seekers (Heneman & Berkley, 1999), organizational citizenship behaviors (Lambert, 2000), and job perform-ance (Mulvey, LeBlanc, Heneman, & McInerney, 2002; Werner & Mero, 1999).

As noted by Rice, Phillips, and McFarlin (1990), one of the most intriguing findings with respect to pay satisfaction is the modest strength of the relationship between how much an individual is actually paid and that individual's pay satisfaction. Although this relationship typically has been positive and statistically significant, it has generally explained well under 25 percent of the variance in pay satisfaction. These findings have led others to examine the prediction of pay satisfaction based upon multiple discrepancies or multiple monetary standards of comparison for the individual employee (Law & Wong, 1998), along with demographic and psychological variables (Berkowitz, Fraser, Treasure, & Cochran, 1987; Carraher & Buckley, 1995).

Scholars have noted that comparatively little research advances models of pay and their predictors (Cox, 2000; Heneman, 1985; Miceli & Lane, 1991; Rynes & Gerhart, 2003; Shaw & Gupta, 2001; Williams & Brower, 1996). This could be due to the assertions of some researchers that it is clearly "too early to offer a precise theoretical model of the determinants of income satisfaction" (Berkowitz et al., 1987, p. 546), yet such model development is still needed (Shaw & Gupta, 2001). Heneman's (1985) review of the pay-satisfaction literature discussed two major models of pay satisfaction: the equity model of Adams (1965) and the discrepancy model of Lawler (1971). A third model, the theory of equitable payment, developed by Jaques (1961, 1964) in the United Kingdom, has generally been overlooked by theorists due to difficulties in measuring some of its concepts (Belcher, 1974; Hellriegel & French, 1969) but is making a comeback (Allison & Morfitt, 1996; Brookes, 1994; Carraher, Carraher, & Whitely, 2003; LipBluman & Leavitt, 1999), and it may be useful in the examination of the antecedents of satisfaction with pay. Both Adams (1965) and Lawler (1971) also cited Jaques' work in their own.

Jaques' theory of equitable payment (1961, 1964) postulates that individuals have an intuitive knowledge of: (1) their capacity for work, (2) the level of their work in terms of responsibility and performance, and (3) the appropriateness of their pay. Further, with respect to individual capacity to work, Jaques has hypothesized that capacities for work develop in regular and predictable patterns over time; that it is necessary that one work in a role equivalent to one's capacity for work in order for him or her to experience psychological equilibrium in their job and with their pay; and that employees seek jobs that will match their level of work with their current capacity for work. …

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