The role of race and social class in compensation decisions

Purpose – The purpose of this paper is to examine the influence of race and social class on wage differentials between Black and White employees. Design/methodology/approach – A survey with four possible conditions (white/black target who was lower/middle class) was used in the study to examine the interaction between race and social class on compensation decisions. Findings – The paper finds that there was a significant interaction between race and social class when predicting the percentage of pay increase given to employees. Specifically, there was a significant negative correlation between perceptions of social class and percentage of increase when the target was Black, but there was no such correlation when the target was White. Research limitations/implications – The sample was 95.6 percent White and did not consist of managerial employees in actual compensation decisions; however, it shows evidence that people are affected by their perceptions of social class and race when making such decisions. Practical implications – Policy makers should not forget that perceived social class might interact with race to influence discriminatory decisions in workplaces. This research suggests that Black employees who are perceived to be middle class are discriminated against more than those who are perceived to be lower class. Businesses need to be aware of unintentional biases that may be plaguing their managers and train them to avoid such biases. Originality/value – This paper contributes new insight into the literature on the wage gap between Black and White employees by showing the interaction between race and perceived social class when predicting pay increases.