Wages Concept “Firms may want tomotivate employees with the prospect of a higher salary uponpromotion rather than through performance pay,” recommendexperts. (Photo: Shutterstock)

People tend to be motivated to work harder when they learn how much theirboss makes – but if their coworkers make morethan them, they can become so resentful that they start slacking off, according to the study, “How Much Does Your Boss Make? The Effects ofSalary Comparisons.”

Harvard Business School assistant professor Zoe Cullen andRicardo Perez-Truglia, assistant professor at University ofCalifornia, Los Angeles, conducted a field experiment with 2,060employees from a multi-billion dollar corporation, and found thatperceived peer and manager salaries have a significant causaleffect on employee behavior. While higher perceived peer salarydecreases effort, output and retention, higher perceived managersalary has a positive effect on those same outcomes.

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Katie Kuehner-Hebert

Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.