Chicago Booth Review Podcast What If Your Coworker Earns More than You?

Hal Weitzman: If you found out that a co-worker at the same level as you earns significantly more than you do, what would you do? Welcome to the Chicago Booth Review Podcast, where we bring you groundbreaking academic research in a clear and straightforward way. I'm Hal Weitzman. Today we're continuing our podcast mini-series, the audio version of our popular business practice column where we ask people to script what they would say in a challenging workplace scenario, submit their responses and rate each other's contributions. Then we bring in Chicago Booth Behavioral Science Professor George Wu to analyze the results. Today, George is talking about what to do when you find out that a peer gets paid a lot more than you. First, let's hear the scenario.

Narrator: Your co-worker, Robert, is a great guy and a very good analyst. You've known him since you started together at McFarland Media several years ago. He recently made a casual reference to his salary, and to your dismay, it's 20% higher than yours. He's good, but as far as you're aware, his career path has more or less mirrored your own. You started at the same time in the same role, and neither of you has received a formal promotion since. This revelation is eating at you, so you've tried to divine some reasoning for it by comparing your performance to what you can observe of Robert's, but on any measure you can think of, your performance isn't notably different. In fact, your manager recently gave you some encouraging feedback on your work. At wit's end, you've requested a special one-on-one with her this afternoon, but what do you say?

Hal Weitzman: George Wu, welcome back to the Chicago Booth Review Podcast.

George Wu: Glad to be here.

Hal Weitzman: Now we are back again talking about our favorite subject, the business practice series.

George Wu: That's my favorite subject.

Hal Weitzman: Good. Well, remind us why we do this. What is the business practice series?

George Wu: So it's a series that we started a few years ago, and I teach negotiation. And one of the things that I get asked for is advice on actually situations like this, which is negotiating about money and lots of other kinds of things, and I get these from my students and my alums and from executives. And honestly, I felt like it was much more efficient rather than give individual advice to individuals, as much as I might like them, to essentially try to economize a little and share my thoughts with a broader group, so I hope this is really useful for people.

Hal Weitzman: Well, it's certainly fun, and it's not just your thoughts, right? We crowdsource, as we'll explain in a little bit, we crowdsource the responses, and we rate those responses using the same crowd, so we get a good, general view of what we think and how we think we should respond to a situation like this one. You find out-

George Wu: And I learned from, you know, it's not as if something, I don't know what things people are going to like.

Hal Weitzman: Excellent. Well, let's dig into it. This situation will fill many of us with fear. You find out that somebody else is paid more than you are for basically the same work and having had the same experience. And you and I have talked before about the fact that most people just hate talking about pay with their bosses, and they hate negotiating for pay, they don't like asking for pay, they don't even like mentioning it. So the idea that you find out somebody else is paid more probably fills many people with dread. Why is that? And maybe just talk a little bit more about what makes this scenario interesting to you.

George Wu: Yeah. So one bit of data is from PayScale, it's kind of an interesting result, is that 57% of respondents have never requested a raise, never, ever. Maybe some of these are 23 year olds, but my guess is that there are people in their fifties and sixties who have not. And this is more likely to be true for women, and I think, one, is it's just uncomfortable, and certainly I think this is something that affects women is there's an attribution of people or there's a fear of an attribution of people are asked, which is that you may be seen as being pushy, and people don't like to seem efficacious but not pushy.

Hal Weitzman: Or would they also be worried that they might be seen as only being interested in the money and not in the job?

George Wu: Absolutely, yeah. And of course a good reason not to ask is that you think that you're not going to be successful, and so people might be convinced that they are not going to be successful.

Hal Weitzman: But this discomfort, we're talking about pay, is not just true in that when you're asking for a raise, right? It's true at the beginning of when you first get hired, it's true when you get promoted, as we talked about in another episode of business practice. So there is a general aversion to talking about pay at work, is that fair?

George Wu: Yeah, that's right. That for sure is right. And one of the things, I actually did a survey with my MBA students, and it's interesting that about a quarter of my MBA students negotiate for salary. I don't know if that's too high or too low, but a lot of those jobs are ones in which there really is no negotiation. So if they're going to a large employer who is hiring hundreds of MBAs, maybe thousands of MBAs, then there oftentimes is no, let's just say, monetary negotiation to be had. But what's interesting is that when they're asked to guess how many of their classmates actually negotiate, they actually think it's much higher than 25%, so 40%, 50%.

Hal Weitzman: Well, people might be shocked to hear that MBA students, who we typically think of as being more aggressive and more comfortable talking about money, most of them don't negotiate. And so when you say 25%, that's 25% who negotiate not necessarily for salary, for anything?

George Wu: Yeah, that's right.

Hal Weitzman: And so often it could be where they're working?

George Wu: Could be, yeah. I don't actually remember. I think that might be actually negotiating salary.

Hal Weitzman: That's just the salary, yeah, okay. So these people are asking for a little bit more than they're being offered?

George Wu: Yeah, that's right.

Hal Weitzman: But it's low.

George Wu: It's low.

Hal Weitzman: That indicates how much of a taboo it really is.

George Wu: Yeah. And it's obviously a lot different if you're, one thing I tell my students, which I think should be obvious, is that at the sort of entry-level positions, obviously our MBAs are getting amazing positions, but many of them are getting positions that 50, 100, 200 MBAs are getting all over the country, and those are not going to be situations where, but if they are being hired five years from now into a rank in which they are a one-off hire, then for sure there's going to be negotiation there.

Hal Weitzman: And do you track five years out whether people are more likely to negotiate?

George Wu: No, I actually should add that.

Hal Weitzman: You should do that.

George Wu: I should. I would love to know the numbers. And I think one of the things that is really hard here is that I know that when people do, conditional on negotiating, the success rate is actually pretty high, so it's above 50% in terms of salary. And it turns out that in certain kinds of industries where, investment banking, say, where those are exactly the kinds of positions where our career services advises people not to negotiate, and the data say that the few people who actually negotiate in those situations are not successful.

Hal Weitzman: Okay, fascinating. All right. Even though you would want your investment bankers to be good negotiators-

George Wu: Yeah, that's-

Hal Weitzman: They don't like it when you do it to them, it sounds like, right?

George Wu: That's exactly right.

Hal Weitzman: Okay. So this is doubly hard then, because most of us, including MBAs, don't like to talk about pay and negotiate pay, and then here you're mixing that with a perceived inequity.

George Wu: That's right.

Hal Weitzman: So talk about that.

George Wu: Well, I think it's not just, and for sure it's perceived inequity, and nobody likes, I mean, I think that one thing that I always say people should think about when they negotiate is they should use fairness to their advantage, because I think fairness is an overwhelming principle that people subscribe to. They want to be fair. Now there's, as Richard Thaler and many other people have shown in the marketplace, there are oftentimes very differential senses of what it actually means to be fair, so firms and customers react to these things differently, but people want to be seen as fair, though they might be biased in terms of what they see as fair.

That said, I think what makes this circumstance really hard is what you hear is that somebody else is making more than you. You know that you were hired at the same time, you think that you're doing the same work, but what if you're wrong about some of these things or if there's some things that you don't know? So for example, it could be that you were hired exactly the same time and this other person, and you're doing exactly the same work and this other person's actually being paid 20% more than you, well, then there's probably a reason. It could be that this person is just saying something that's not actually true. It wouldn't be the first time that somebody is exaggerating something in the workplace.

It also could be that there are, unfortunately this other employee who you think you're doing work just as well as, is actually a better performer than you, and that would be not so much fun to accuse your employer of paying somebody more unjustifiably, and it turns out to be quite justified because you're pretty close to being axed maybe. And it also could be that there are perhaps some reasons outside of what you know in which this is the case. So as we know, sometimes employers have to respond to idiosyncratic circumstances, so for example, how somebody we desperately need how to do this work in the next three months, you got another offer, we've got to respond to that. We are over the barrel in this situation and that's why, and it's regrettable and whatever, but you had that circumstance and I didn't, and that's what's going on.

So I think what makes this really hard, and it's not clear that people necessarily think about, and I'm sure people don't think about all the uncertainty in this situation, but there is a lot of uncertainty about exactly why or if this circumstance is actually true.

Hal Weitzman: And what you just said makes me think of, there's a lot of behavioral science research, isn't there, about how we perceive our own contributions to the workplace.

George Wu: Absolutely.

Hal Weitzman: So your colleague, Nick Epley, has done research where he asked each individual to say how much of the project did they contribute to the final product, and the final result was like there was 150% because everybody felt like they gave more than they actually gave.

George Wu: Absolutely.

Hal Weitzman: So when we, to your point about you don't know how valuable you are, if you are aware of that, it makes the whole thing much more fraught, doesn't it?

George Wu: Yeah, absolutely. I mean, and part of it is that a lot of those biases are what psychologists call egocentric - it's not egotistical, but it's egocentric - is that you see very clearly all the things that you do, you don't see very clearly all the things that other people do. So it's very salient to you, all the work that you do. It's not salient to you all the kinds of contributions that other people make. And so it's just that availability of knowledge about stuff that you do and lack of availability about stuff that other people do that makes it seem like you are a bigger contributor. So if I think that you are just as good a contributor, it might be that if I actually, in situations like that, you're a whole lot better contributor than I am.

Hal Weitzman: Right, in which case you might deserve to be paid more. And it also might be that if I second guess myself and I think that you might be, and if I'm more humble and I think, well, you actually might be a better performer, then I'm just not going to say anything in this situation. Do you reckon that given that all those complications that you just outlined, and given people's aversion to talk about pay in the first place, that in most cases people would not do anything about this kind of situation?

George Wu: Overwhelmingly that what people write down as responses in these kind of removed situations inflates the actually degree of, let's just say, proactive behavior that people are going to take. So-

Hal Weitzman: Because, to remind people, because we write in the scenario, write a script. We don't say deliver a script, we just ask them what they would say if they were to say something.

George Wu: Yeah. Yeah. And how many times have you said, "Oh, today I'm going to to give Hal that feedback," and then said, "Oh-

Hal Weitzman: Forget it.

George Wu: Hal just had a great weekend. I'll give it to him tomorrow. And then a week later you say like, "I haven't given it to Hal, so might as well. Hal's not so bad after all."

Hal Weitzman: George, let's turn to some of the responses that we received for this scenario.

George Wu: Yeah. So I think one of the things that I've said in the past is that I think one of the fun parts of what we do is that when people submit responses on the web, they actually are encouraged to look at other people's responses. This is at a time when they're really interested in seeing what other people have said, and when they see other people, they're asked to give ratings of other people's responses on a one-to-seven scale. And so part of what we do at the end is we analyze responses, we average the ratings over lots of different respondents to each response, and we also code these responses in lots of different ways to see whether if you did more of this or less of this, or you did this in this way or that way, were those judged to be more effective?

Hal Weitzman: And to go to our earlier conversation, because people are scripting an ideal response.

George Wu: That's right.

Hal Weitzman: This isn't necessarily what people would do, but it's what they think might be the best thing to do.

George Wu: Yeah, absolutely. And it's not even how effective they might be seen, because there are lots of things that you might plan on saying and then you can't say, or let's just say you get flustered when you are going to give certain kinds of direct feedback and things like that. So a lot of people won't be able to deliver these or they won't be able to deliver them with the full fidelity that they would like.

Hal Weitzman: Okay, but if we were going to deliver them?

George Wu: Yeah. I mean, I think that one of the ways that we rated this is how they framed this issue. About 15% of people didn't mention this at all, so those you might think of as being acquiesced, they essentially acquiesced, and those are rated pretty negatively. So the ratings here on a scale of one to seven, on average, the responses are about four, so those were rated even more negatively than the midpoint, four out of seven, 3.4. There were a number of people who focused on, well, let's just say they were more direct. They requested a raise in one way or the other directly, about a third of people did that. And those were rated about 3.2 or 3.1 out of seven. And the ones that were rated the most positively focused on the pay discrepancy as a soft way of at least inviting a conversation about a negotiation about a raise, so but that was about a half, and those were rated about 3.9 out of seven.

Hal Weitzman: Okay.So please give us some examples of what people thought were some of the better ones and some of the less successful ones.

George Wu: So one thing we do when I write up this is we oftentimes put responses at certain percentiles, so I'll give you a 5% response. That means that 95% of responses were rated higher and only 5% were rated lower. "I thought I was a valued member of the team, but it doesn't appear I'm compensated as such. Robert isn't doing anything I'm not. How do you explain the disparities in our salaries?" 2.3 out of seven. Do I have to comment on that?

Hal Weitzman: Well, it's just, I guess it's a classic bringing me a problem but not bringing me a solution.

George Wu: Yeah, yeah, no. I wanted to read it with the tone that I think that this would be delivered.

Hal Weitzman: Yeah, someone's upset. Yeah, clearly upset, yeah.

George Wu: And that's right. And so literally like-

Hal Weitzman: Do think that's the reason-

George Wu: I think they're stamping their feet as well during this whole thing.

Hal Weitzman: Right, yeah. But without being too obvious, what exactly is it that's so off-putting about that? Is it the fact that it's just a problem and not a solution, or is it-

George Wu: Yeah, I think that one is it's very direct and very presumptuous. It's also direct and presumptuous in a situation where it may or may not be appropriate. So I mean, there is, let's just say, and we'll talk about this in a bit, but there are circumstances in which this could be, let's just say it's probably never going to be a great response, but there's probably circumstances where it might be a more appropriate response, and there's circumstances where this is just an awful response. So if it is indeed a situation where you're a low performer, you think you're a good performer, this is something where you're going like, "Who are you?" I mean that you can imagine. And unfortunately, managers have been in situations where they hear their employees talk about themselves in a way that doesn't resemble reality at all, and this could very well be with that. And so that combined with the sort of directness and the presumptuousness of this is not likely to be a very good response. And as you said, it's like basically you're confronting them, you're expecting them to essentially do all the work in correcting this.

Hal Weitzman: Okay, so let's move on to a slightly better-rated response.

George Wu: So here's one in the middle, 3.7 out of seven. "I recently became aware that there are large salary discrepancies between people on the team. I would like to better understand the salary range for my role, where I fall within that range, and the rationale behind that." I think that is example of a large number of them, 50%, in which they focus on the discrepancy. They don't explicitly request a raise. It's obviously, I think, appealing because pretty indirect. It's also, I think my guess is that it's not seen as being a great response because it's not clear where this is going to lead.

Hal Weitzman: If you're enjoying this podcast, there's another University of Chicago podcast network show that you should check out. It's called Nine Questions. Join professor Eric Oliver as he poses the nine most essential questions for knowing yourself to some of humanity's wisest and most interesting people. Nine questions with Eric Oliver, part of the University of Chicago Podcast Network. So George, give us a sense of what was the top-rated response?

George Wu: So this response is 4.9 out of seven, so not exactly something that you-

Hal Weitzman: But an A, nevertheless?

George Wu: That's an A on the curve.

Hal Weitzman: On the curve. Right.

George Wu: On the curve, but you probably wouldn't put this on a T-shirt, or if you put it on a T-shirt, you wouldn't sell that many.

Hal Weitzman: 2.0 grade point average.

George Wu: Yeah. So this is like I got a 50 on an exam where the average was 33. So what's interesting is that this person basically broke their response into how they might think about things before the conversation, during, and after. Before, they said, "Here's some things that I want to think about. Think about what it would take for you to feel as if your job was compensating you more fairly, think long-term, know what you want, know how you feel, ask if there are other perks. Is this role really something in which there are more opportunities? How important is the money? What are your plans?"

And then during, they thought that you should be direct, and here's what they said. "I've been in this role for this number of years. My reviews are consistently favorable. I've recently become aware that similar roles pay more in this industry, and I'd like to bring my compensation up to that level. Can we make a plan to get me there?"

And then after, "Be prepared for an answer you don't want to hear. Be prepared to work that plan you've asked for." So both be ready for disappointment and perhaps be ready to counter-argue, though they don't say exactly how you might counter-argue. And then if there are things that are, ways that the conversation is working to your favor, then get ready to seize that opportunity. That's what I hear them saying.

Hal Weitzman: So it sounds like the lowest rated ones were sort of saying, I've found you out, the middle rated ones were sort of saying, can you explain, and the top rated ones were saying how can we get me to a place where I'm earning more?

George Wu: And I think it was also a reflection that understand what you want out of this, so the bigger picture and how important is this? I mean, I think it can obviously feel like a bigger catastrophe than it really is. Maybe it is a catastrophe, maybe it's not a big catastrophe, maybe this is just a blip, maybe it's something in which you're careening off the road. But that's something that you really have to understand because if, at the end of the day, they say, "Look, you're doing great," but they don't want to respond at all to this pay discrepancy, and they don't want to admit that this pay discrepancy is not appropriate, either they're not being direct with you about your work or they are being direct with you about your work, but they're not compensating you or respecting you as a result. And then you probably do want to, under some circumstances, get the heck out of there.

Hal Weitzman: But it does raise an interesting point about when people are upset, there's things going on, right?

George Wu: Yeah.

Hal Weitzman: One is they want to vent, they want to express their upset-ness, and maybe that clouds what they actually want to get out of the conversation.

George Wu: Absolutely.

Hal Weitzman: When you teach negotiation, do you find that people sometimes lose sight of what they think a good outcome would be?

George Wu: Yeah. I mean, I think one of the things when we do a version of this in our classroom, I basically just read people's responses and basically go through them and have people rate them real time, and I think one of the things that people are amazed about is, first, that there are lots of different ways to respond that they never would've thought about, but two is that people think about these things, they react to them, really, really differently. And I think when you're in this situation where you're all angry and hyped up and thinking that it's because X that they're doing Y and therefore whatever, somebody else is saying, well, it could have been it's Z that they're doing Y or something else or whatever. And that those are things that don't come to mind, and I think it's oftentimes really useful just to talk about these things with other people.

I mean, the danger of talking about these things with other people is that what happens is that you're telegraphing. I'm telegraphing something to you, Hal, that I want you to approve of what I'm saying. Well, and sometimes I actually want you to approve what I'm saying because I need the confidence, but sometimes what I want you to do is I want you to workshop this and tell me why this is stupid. Do you want my real feedback? I would not. There's no way that I would do this. And I think unless you are clear about this, sometimes when you're looking for feedback, you get support, and when you're looking for support, you get feedback. And those are obviously not the right ... When other people have the wrong idea about what you're looking for, you're not going to get very good advice.

Hal Weitzman: Right. And so that's one of the other things that makes this scenario complicated, is you are looking for feedback, but you're looking for positive feedback. You're not really looking for somebody to tell you, "You know what? You're paid less because you deserve less."

George Wu: Yeah. And no, I think that one thing we talked about in previous versions of this podcast is I wrote these things before there was ChatGPT. And now I think that there is one great, there are lots of advantages of ChatGPT, but I think that one advantage of ChatGPT that you could use is that this is a way in which you could crowdsource both criticism, you can say what's good and bad about this response. You can also use this as ways of generating alternatives. You have to be somewhat skilled in terms of being able to query ChatGPT in ways that you'll get different kinds of responses, but there's clearly a style that ChatGPT gives that I think those of you, us who have used it, are familiar, but you can get it to deviate from that style to some extent.

Hal Weitzman: So George, I know that you did something different with this business practice, which is you got other people to rate the responses who are not part of the survey, so tell us about that.

George Wu: Yeah. So one thing that we used was Amazon's Mechanical Turk platform. That's a platform that people use in the psychological sciences to recruit subjects for studies and things like that. And one of the things, we did this for a couple reasons, I think that one thing is that is nice about getting responses from people who just read the scenario is that they're interested, they have a point of view and so on, but they're in the mindset of the employee, they're not in the mindset of the manager, per se. And what we wanted to do was we wanted to get people who were really in the mindset of the manager, and we also wanted to deal with some of the maybe precipitating circumstances.

So what we did was we recruited about more than 300 people, and we gave them a bunch of these responses, and what we overlaid were four different scenarios. So scenario one was we said, "But it's not true. You know that Robert lied and their salaries are closer than he led his co-worker to believe." I won't give you all the things, but study scenario four was, "It's true, but it's because Robert was recruited to another company a year ago. Robert was on a critical project and you had to offer him a better salary. You had plans to correct this injustice with this employee, but you don't have the money right now." And then scenario three is something, "It's true, but you know that this person is not nearly as good as Robert is. You've tried to give that employee feedback before, so you're a little surprised."

So you can see, imagine that under these various different kinds of scenarios, certain kinds of responses might really be reacted to differently. So I'll give you an example of one. One response was, "I would like a salary increase. I'm a very good analyst, my performance is excellent, and I feel it would be fair. This is what I would like to discuss with you." So this response was rated relatively well when Robert lied, a 4.8, but it was predictably much less favorably seen, a 2.5, when the raters knew that you were actually not a very good performer.

And what I think is interesting is that the responses that were rated the best, and you can look at the column to see which ones they were, were rated highly in all the circumstances. So just some numbers, it's kind of amazing, is the top rated response was rated 5.4, 5.3, 5.6, and 5.3 across the four scenarios, which is basically the same number. And so I think what's interesting here is that the best responses are ones that are not just high quality, but they're high quality in a specific way. They're robust to lots of different, let's say, interpretations or manifestations of the uncertainty underlying a situation.

Hal Weitzman: Okay. And one of the characteristics of those is that they're forward looking and they're sort of problem solving and very true.

George Wu: Yeah. Yeah, and I think the direct ones, the ones that they may very well be appropriate in a particular scenario. So if you knew that this was the underlying situation and you had all the facts together, then you could fine tune your strategy for the state of the world, except the problem is you may not be in that state of the world. And if you're not in that state of the world, then you're basically going to fall off the cliff. So that's what happens when you really kind of fine tune a response to a particular assumption about what's going on.

And as behavioral scientists, what we know is that people oftentimes do not do a very good job of thinking about what the precipitating circumstances, they don't think about the uncertainty. And so we think this is why, this is what led to this, and because I think that this is what led to this, this is what I will respond. Well, if that A might've led to this, but B and C and D. And if you had thought about B and C and D, for example, I'm sure that some of these people with the direct responses never, ever entertained the idea that they were actually a poor performer. And obviously if they had an inkling that they were a poor performer, they would never have said those words, or let's hope they would never have said those words.

Hal Weitzman: So I guess the advice that you take from that is think of a response that's going to work well regardless of the circumstances?

George Wu: Yeah. I mean, I do think one thing that this suggests is that you really should think about why are we here? Why did this happen? And we generate hypotheses about the world, but again, there are lots of behavioral science research that says when people generate hypotheses, even when they are in a task in which your job is to generate as many hypotheses as possible, they say, "I generated just ridiculous hypotheses, I've got them all." No, there are many, and then the next subject will come through and generate another, saying, "I've generated all the hypotheses." And there will be a bunch that number two had that number one didn't, and one number one had that number two didn't, and that that's just the nature of the way our mind works.

Hal Weitzman: Well, George, thank you. This has been another fascinating discussion. We'll have to be back, talk more business practice.

George Wu: Well, I'll be back.

Hal Weitzman: Okay, great. That's it for this episode of the Chicago Booth Review Podcast, part of the University of Chicago Podcast Network. For more research analysis and insights, visit our website at chicagobooth.edu/review. When you're there, sign up for our weekly newsletter so you never miss the latest in business-focused academic research. This episode was produced by Josh Stunkel. If you enjoyed it, please subscribe, and please do leave us a five-star review. Until next time, I'm Hal Weitzman. Thanks for listening.