Wages Concept “Firms may want to motivate employees with the prospect of a higher salary upon promotion rather than through performance pay,” recommend experts. (Photo: Shutterstock)

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

Harvard Business School assistant professor Zoe Cullen and Ricardo Perez-Truglia, assistant professor at University of California, Los Angeles, conducted a field experiment with 2,060 employees from a multi-billion dollar corporation, and found that perceived peer and manager salaries have a significant causal effect on employee behavior. While higher perceived peer salary decreases effort, output and retention, higher perceived manager salary 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.

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