Hiring and Collaborating with Higher-Paid Employees

Source: Berkeley Economic Review

What happens when we know that others are paid more than us?  Does it affect our willingness to collaborate with them?  What about hiring decisions? Are we more or less likely to hire someone who may earn more than us?  Cornell Professors Kevin Kniffin and Angus Hildreth examined this question in a series of experimental studies.  They found an interesting, but not surprising, dichotomy when it came to collaboration vs. hiring.

First, the scholars discovered that, "People chose to collaborate with higher- rather than lower-paid peers unless explicitly told that their potential collaborators’ knowledge, skills, abilities, and experience were similar, suggesting that pay was viewed as a signal for competence."  On the other hand, they found that, "People were less likely to hire a candidate with a higher (versus lower) pay history for a subordinate position on their team."  

This study has some very interesting practical implications with regard to the pay transparency movement.   The collaboration finding seems quite positive, though one has to wonder whether it is appropriate for workers to always use pay as a sign of competence.  In some organizations, we know that compensation and position is not at all a sign of strong capabilities!   The hiring dynamic is perhaps more problematic.  We would hope that people would hire the best talent, and that they would not feel threatened by someone who had excellent capabilities warranting high compensation.  Naturally, though, people's emotions are affected by compensation differences.  If it means that we don't hire the best people, then that would be very worrisome.