A University of Michigan business professor explores cheating in the workplace. He says pay disparity among lower-income may be a key factor in unethical behavior.

A summary of his commentary:

People are more likely to cheat when the potential rewards are high — that’s a well-known axiom. But new research by Scott Rick of the Ross School for Business shows there’s potential for cheating even when the rewards are low.

A series of experiments in his new paper suggests that dishonesty among low-paid workers increases if they find out others are getting paid more for the same work. Low pay rates alone aren’t enough to trigger cheating, Rick says. It’s the upward comparison that makes it more likely low-paid employees might cheat.

The finding has important implications for managers, since low-stakes cheating creates billions in annual losses for businesses. Rick’s paper, “Cheating More for Less: Upward Social Comparisons Motivate the Poorly Compensated to Cheat” was co-authored with Leslie K. John of Harvard Business School and George Loewenstein of Carnegie Mellon University, and is scheduled to appear in the journal Organizational Behavior and Human Decision Processes.

“We all know that economic gain is an important driver for unethical behavior,” says Rick, assistant professor of marketing. “We wanted to look at psychological motivations that may be at odds with basic cost/benefit reasoning. We know people can become out of sorts about salary differences, especially if they seem unjustified. But nobody had experimentally examined whether that could lead to misbehavior.”

Rick and his co-authors ran two experiments to probe that open question. In the first, subjects received either 5 cents or 25 cents for each self-reported correct response on a list of questions. Some participants knew about the different pay rates while others did not.

When pay rates were public, those paid 5 cents per correct answer cheated more often than those paid 25 cents, despite the lower economic incentive. When the pay disparity was kept private, those paid 25 cents cheated slightly more.

Another experiment created two groups — one where low-paid subjects were told there were others in the room earning more, and one where low-paid subjects were told there was a higher pay rate, but that everyone in their session would be paid the same.

Cheating was higher in the group where low-paid subjects were in the same room as higher-paid ones. There was little cheating among the lower-paid subjects when they were told everyone in the room was being paid the same lower rate.

“A low wage, in and of itself, doesn’t stimulate cheating,” Rick says. “However, awareness that others around you are earning more for the same work does encourage cheating. These upward social comparisons matter in a way that standard economic theory would not predict. But the psychology of workplace motivation is much richer than simply what you yourself earn.”

Rick says companies should consider managing differences in wages for similar work or, when possible, trying to keep the information private.

“It’s hard to say what the optimal balance is, because flat salaries will make it difficult to attract and retain the very best employees. But there are ways to compensate people privately, which don’t show up in a base salary, such as incentive bonuses,” says Rick.

The research also may explain why wealthy people cheat for seemingly trivial gains. When the wealthy can easily compare themselves to other similar people who earn even more, they also may be more prone to cheating.