Equity Theory
- Inequity exists when worker’s outcome/input ratio is not equal to referent.
- Underpayment inequity: ratio is less than the referent. Worker feels they are not getting the outcomes they should given inputs.
- Overpayment inequity: ratio is higher than the referent. Worker feels they are getting more outcomes then they should (given inputs)
- Restoring Equity: Inequity creates tension in workers to restore equity.
- In underpayment, workers reduce input levels to correct.
- Overpayment, worker can change the referent to adjust.
- If inequity persists, worker will often leave the firm.