They Work Hard for Their Money…or Do They? The Role of Meritocracy Beliefs on Evaluations of Pay Dispersion

Pay dispersion in American firms has grown with CEOs vastly out earning others, which has been met with mixed reactions in public opinion. We propose that different meritocracy beliefs, descriptive versus prescriptive, can account for such opposing reactions. On the one hand, we expect descriptive meritocracy beliefs (i.e., the belief that outcomes are allocated based on merit, such as effort, ability) to predict less negative evaluations of pay dispersion, regardless of how high those levels are, due to hierarchy-enhancing/system-justifying motivations. On the other hand, we expect prescriptive meritocracy beliefs (i.e., the belief that outcomes ought to be allocated based on merit) to predict negative evaluations of pay dispersion, particularly when levels of pay dispersion are higher, as it may be seen as less equitable. We found support for these hypotheses in two survey experiments with American MTurk participants (Ns = 778, 762) in which we assessed meritocracy beliefs, manipulated levels of pay dispersion within fictious organizations, and assessed participants’ evaluations (i.e., perceptions of inequity, and evaluations of the spread of pay as too unequal and as unfair). We found that as levels of pay dispersion rise, participants more negatively evaluate it, particularly if they have stronger prescriptive meritocracy beliefs. However, the more participants believe that organizations are currently meritocratic, the less negatively they evaluate any level of pay dispersion. Thus, two different forms of meritocracy beliefs, descriptive and prescriptive, predict opposing reactions to pay dispersion.