Do altruistic employers purposely pay lower salaries?

University study finds employees, job candidates less comfortable asking for higher pay – and employers may take advantage of that

Do altruistic employers purposely pay lower salaries?

A U.S. study has found that many employees at organizations who loudly tout their altruistic efforts — along with job candidates applying for jobs there — often feel uncomfortable asking for higher salaries.

It all comes down to a feeling of guilt, which leads to a self-censoring effect, according to research from the University of Texas.

“They feel like they don’t want to ask for more money; they feel like they can’t. They feel that it would be seen as crass and inappropriate and greedy and what person wants to save the children and also make a few extra bucks?” says Insiya Hussain, assistant professor of management at McCombs School of Business in the University of Texas in Austin, Texas.

5 experiments around salary talks

The research study, “Pay Suppression in Social Impact Context,” consisted of five separate experiments in which participants were given context about an organization’s purpose and they were then asked how they would conduct salary talks.

“We asked them to write open-ended responses about whether or not they would negotiate and why,” says Hussain.

“We found that those in the social impact framing condition were actually 32% less likely to negotiate but the reason is that ‘We will be seen as selfish and counter-normative’ appeared much more so in the social impact conditions than in the control condition.”

Hussain collaborated with Marko Pitesa and Michael Schaerer of Singapore Management University and Stefan Thau of INSEAD on the study.

Social impact framing and compensation

The hypothesis was based on something that many organizations are employing as a branding exercise, says Hussain, which is social impact framing.

“They say things like ‘We’re here to make the world a better place. We have this higher mission to benefit human welfare and we care about employees who care about this mission, who are passionate about it, and who really want to have an impact,’” she says.

“It’s basically using language and communication that framed the work as being pro-socially motivated rather than just neutral or to make money, or whatever you might consider to be more generic.”

While the goals on the surface are, of course, commendable, it can hamper employee pay, says Hussain.

“One of the things that we know from prior research is that meaningful work that has the potential to provide meaning — which is something that socially impactful work has — is really motivating.”

“Job seekers oftentimes are actually willing to give up some amount of money even to work for a company in which they can feel fulfilled and feel like they’re making an impact,” says Hussain.

While flexibility has been seen as more important, salary remains the most desired area for employees, according to a recent survey.

Bias against extrinsically motivated employees

The idea stems from other studies that suggests managers at these types of organizations have a “motivation purity bias,” she says.

Certain types of employees who may be “passionate” about their jobs but also extrinsically motivated by money may face a negative feeling from leaders.

“It reduces the extent to which they see them as being intrinsically motivated, and therefore a good fit for the job. There seems to be this bias — which prior research has found, and what our study is showing is — it looks like job candidates censor; they pick up on this and they don’t want to take that risk, and as a result, they asked for less money, or they just don’t negotiate at all,” says Hussain.

While this study focused on how employees may feel about salary talks, there is a danger for organizations who recognize this effect is happening.

“If you’re aware that this could be essentially be occurring, you could misuse it as a tool to intentionally suppress employee pay. Organizations that are aware that ‘If we really wave this flag when we’re across the negotiating table, people aren’t going to ask us for more, and we can get away with paying people less,’” says Hussain.

“It’s interesting that a company that claims to care about human welfare could potentially find itself — either intentionally or inadvertently — harming the financial wellbeing of its own employees.”

The responsibility to counter this often rests with HR, she says.

“For HR professionals aware of this bias, it is trying to come up with tools to debias people in positions of power and decision making when it comes to pay and promotion, and to recognize that the reason for doing all of this is to attract and retain the very best workers and not prematurely turn away people who could have been excellent employees.”