Employee theft as a reaction to underpayment inequity: The hidden cost of pay cuts

Employee theft rates were measured in manufacturing plants during a period in which pay was temporarily reduced by 15%. Compared with pre- or postreduction pay periods (or with control groups whose pay was unchanged), groups whose pay was reduced had significantly higher theft rates. When the basis for the pay cuts was thoroughly and sensitively explained to employees, feelings of inequity were lessened, and the theft rate was reduced as well. The data support equity theory's predictions regarding likely responses to underpayment and extend recently accumulated evidence demonstrating the mitigating effects of adequate explanations on feelings of inequity. Employee theft constitutes one of the most pervasive and serious problems in the field of human resource management. Although exact figures are difficult to come by, the American Management Association (1977) has estimated that employee theft cost American businesses from $5 billion to $10 billion in 1975, representing the single most expensive form of nonviolent crime against businesses. Traditionally, social scientists have considered several plausi