What counts is the comparison

John Stacy Adams published in 1963 a theory according to which a person compares the ratio between what they contribute and what they receive with the same ratio for a reference person.

Contributions include effort, but also training, experience or seniority; rewards include pay, but also status or recognition. What matters is not their objective value, but the way the person perceives and weights them.

The perceived gap produces a tension calling for restoration: altering effort, altering the pay demanded, changing the reference person, or leaving.

The weak point of the initial model is that it does not predict whom one compares oneself with. Later work has shown that the reference is most often close: same department, same occupation, same seniority.

That proximity echoes an older idea of Leon Festinger, who argued in 1954 that people assess their own abilities by comparing themselves with similar people rather than with very different ones.

It explains why transparency produces its strongest effects within a unit, and why gaps with very distant positions produce less measurable reaction.

Laboratory experiments find reactions to unfavourable inequity, with robust effects on effort supplied and on reported evaluations.

Reactions to favourable inequity, which the theory also predicts, are much weaker and often not found, a result that led to reformulations of the model. An overpaid person more readily finds a justification, by revising their own contributions upwards, than changes their effort.

Gerald Leventhal and then others distinguished fairness of the outcome from fairness of the procedure that produced it: consistency of rules, absence of bias, possibility of correction, information.

Several studies find that a procedure perceived as fair attenuates the effects of an unfavourable outcome, which is this literature's most useful result for understanding pay decisions. A field study by Jerald Greenberg, published in 1990, thus observed that a carefully explained pay cut was accompanied by less recorded theft than an identical cut announced without explanation.

Most of the evidence comes from short laboratory experiments and self-report surveys, with the usual limits of both formats.

The few field studies exploiting real pay shocks find the direction of the effects but more modest magnitudes, the usual gap between laboratory and real situation. The main difficulty remains the same as in 1963: we observe the reaction, rarely the comparison that produced it or the reference person chosen.