Envy in Mission-Oriented Organizations

Abstract

We study how envy affects screening contracts offered to employees who care about the mission of the organisation and differ in ability, which is their private information. We show that organisation's mission plays a critical role. In sectors where mission is important, despite receiving higher wages than their less talented colleagues, high-ability workers perceive their contract as unfair because they are required to perform much more demanding tasks. In contrast, in sectors where mission is not particularly relevant, the less talented employees are envious towards their high-ability colleagues. Our model provides novel implications for organisations' compensation schemes and new insights on the possible effects of minimum wage policies. We test our theoretical predictions by using the German Socio-Economic Panel data and a novel survey addressed to academics in Spain.