Equity Theory shows how a person views fairness in regard to social relationships such as with an employer. A person identifies the amount of input (things gained) from a relationship compared to the output (things given) to produce an input/output ratio. They then compare this ratio to the ratio of other people in deciding whether or not they have an equitable relationship. Equity Theory suggests that if an individual thinks there is an inequality between two social groups or individuals, the person is likely to be distressed because the ratio between the input and the output are not equal.
For example, consider two employees who work the same job and receive the same pay and benefits. If one individual gets a pay raise for doing the same work as the other, then the less benefited individual will become distressed in his workplace. If, on the other hand, both individuals get pay raises and new responsibilities, then the feeling of equity will be maintained.
Other psychologists have extended the equity theory, suggesting three behavioral response patterns to situations of perceived equity or inequity (Huseman, Hatfield, & Mile, 1987; O’Neil & Mone 1998). These three types are benevolent, equity sensitive, and entitled. The level by each type affects motivation, job satisfaction, and job performance.
1. Benevolent-Satisfied when they are under-rewarded compared with co-workers
2. Equity sensitive-Believe everyone should be fairly rewarded
3. Entitled-People believe that everything they receive is their just due
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