Examination for Professional Practice of Psychology (EPPP) Practice Test

According to equity theory, what is more important than the absolute amount of pay for employee motivation?

1. Employee's perception of fairness

2. Employee's overall satisfaction

3. Absolute pay level

4. Pay's historical context

The correct answer is: Employee's perception of fairness

In the context of equity theory, employee motivation is heavily influenced by their perception of fairness regarding pay and rewards rather than the absolute amount of their compensation. This theory posits that individuals measure the ratio of their inputs (such as efforts and skills) to their outputs (such as pay and rewards) in comparison to others. If employees perceive that their contributions are met with equitable compensation, they are more likely to feel motivated and satisfied in their roles. The perception of fairness encompasses various factors, including comparisons to peers within the same organization or industry, thereby directly influencing motivation and job satisfaction. If employees feel that they are being compensated fairly in relation to their colleagues, regardless of the actual pay levels, they are more likely to be motivated. Other options relate to different aspects of the workplace or employee experience. Overall satisfaction can be a result of many factors including compensation, environment, and personal attitudes, while absolute pay level refers to the actual dollar amount earned, which equity theory argues is less significant than the perceived fairness of that pay relative to others. Pay's historical context may influence perceptions but does not serve as the primary motivational driver according to equity theory.