Journal of Business & Economic Studies, Vol. 17, No.

2, Fall 2011

The Disutility of Equity Theory in Contemporary Management Practice

Michaeline Skiba, Monmouth University

Stuart Rosenberg, Monmouth University

Abstract

Equity theory was an important element in the workplace in the second half of the twentieth
century, ensuring the fairness of employee reward systems as well as the balance among the
business, government, and society sectors. Based on significant changes to each of these sectors
in recent years, the utility of equity theory has been severely compromised. This paper explains
the various changes that have taken place, and it offers possible solutions to restore the balance
so that workers once again can attain meaningful employment and the associated benefits that
accrue to it.

Keywords: Management Education, Equity Theory, Unemployment, Underemployment

JEL Classifications: A10, D63, J30, J6

Introduction

Equity theory emerged about a half century ago, during a period when several
management models attempted to explain job motivation. Building on Maslow’s seminal theory
on the hierarchy of needs (1943), the concept of motivation exploded in the 1960s and 1970s
with significant models such as McGregor’s theory X and theory Y, McClelland’s learned needs
theory, Vroom’s expectancy theory, Herzberg’s motivator-hygiene theory, House’s path-goal
theory, and Handy’s motivational calculus. Perhaps more than any other model, equity theory,
which John Stacey Adams developed in 1963, came closest to explaining workers’ motivation in
the context of whether they perceive they are being treated with fairness.
In equity theory, motivation is not solely a function of individual rewards. Instead,
motivation is a function of how individuals view their ratio of outcomes to inputs (i.e., rewards
and effort) relative to the ratio of outcomes to inputs of referents (i.e., others with whom they
compare themselves to determine if they are being treated fairly). Workers can perceive an
overreward or an underreward, but according to the model, the latter inequity certainly would
result in workers taking some sort of action to restore equity. One way that workers can restore
equity is to reduce the amount of effort they put into their job. The other option is to request
greater rewards, such as an increase in pay. If equity cannot be restored by either decreasing
inputs or by increasing outcomes, workers ultimately will leave their jobs.
For the balance of the twentieth century, equity theory became operationalized in the
workforce of the U.S. and other developed economies, because workers generally were
successful when applying the principles of the model. If they perceived that they were being
treated unfairly, then they were able to take the necessary steps to correct the inequity. In recent
years, however, there has been an erosion in the applicability of equity theory due to a disturbing

1
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

trend in the labor market. The trend that we have experienced has been the rise of
underemployment.
Underemployment is tracked daily by the Gallup Organization. Gallup defines
underemployment as the combination of unemployment and involuntary part-time employment.
The U.S. Department of Labor publishes data on unemployment only; no government statistics
are available on the number of persons who might be viewed as underemployed. In July 2011,
the government reported that the unemployment rate in the U.S. was 9.1%, having shown little
definitive movement over the last several months. Of the 153.2 million persons reported as being
in the labor force, the number of unemployed persons totaled 13.9 million. Among the 139.3
million persons reported as employed, the government noted that this included 8.4 million
persons who were employed part-time but desired full-time employment. Moreover, the
government noted that its data excluded 2.8 million persons that it described as marginally
attached to the labor force (i.e., persons out of work who were ready to work but had not sought
work at some point in the prior 12 months). Included among the persons marginally attached to
the labor force were over 1.1 million discouraged workers, who are defined as individuals not
currently looking for work because they felt that no jobs were available for them in the current
employment market.
As of July 24, 2011, Gallup also reported an unemployment rate of 9.1%. In addition,
Gallup reported 9.6% of the labor force as being employed part time but wanting full-time
employment. Together, Gallup reported this share of the labor force—18.7%—as
underemployed. This rate does not include those workers in the labor force who are mismatched
with their jobs (i.e., they are grossly overeducated relative to others in the same occupation).
Since the government has reported the percentage of the labor force with adequate employment
to be steadily declining, then a declining or flat unemployment rate signifies that involuntary
part-time employment and mismatched unemployment are on the rise.
Inferior employment has existed to some extent in the U.S. economy since the Great
Depression. No measures of underemployment existed, however, until the recession of the early
1980s. During that time, high unemployment rates were a threat to workers who were still
employed because employers could downgrade jobs. Potential employees in the labor market
were forced to settle for less because there were few alternatives to downgraded jobs.
Conventional measures of the labor force participation rate and the unemployment rate ignored
this marginal employment as an economic as well as a social problem (Clogg, Eliason, & Leicht,
2001).
As firms continue to be pressed to report profits in an increasingly competitive global
economy, the problem of underemployment is expected to persist in the job market.
Consequently, in this environment workers are less likely to have as much leverage as they might
like to have if they were to attempt any action to fix a situation where they are frustrated or
angry. Assuming that workers can neither risk reducing their effort or demand increased rewards
in today’s job market—not to mention having the option of simply leaving their job—the
relevancy of equity theory needs to be re-examined. This paper considers job motivation in the
current environment and discusses those solutions that might be available to restore a sense of
equity for workers.

2
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

A Model for Evaluating Equity Theory

Much of the recent literature on equity in the workplace (e.g., Anderson & Patterson,
2008; Shore, Sy, & Strauss, 2006; Till & Karren, 2011; Vasse, 2010) deals with organizational
justice vis-à-vis job performance as well as the behaviors that result when there is a perception
that they do not match up.
Equity theory can be evaluated by using an economic construct based on the research of
Heilbroner (1972), which emphasized the critical balance that is necessary among business,
government, and society. The triangle that we utilized to illustrate this model is shown in Figure
1. Business, government, and society are equally 60 degrees in length, indicating appropriate
balance among the three sectors. The novelty of this paper is the use of this model as a
framework for discussing the relationship among these sectors.

Business Government

Society
Figure 1. The Business-Government-Society Triangle

When the various theories on motivation were at their peak in the 1960s and 1970s, each
of the three sides of the pyramid functioned effectively in the macroenvironment. With equity
theory in particular, individuals in the labor force (i.e., society) possessed the ability to ensure
that there were sufficient checks and balances in the pyramid so that neither of the other sectors
(i.e., business or government) could exert too much influence and thereby destroy the balance.
With a number of significant changes in the macroenvironment over the last 20 to 30 years—and
especially since the advent of the 21st century—a series of events has altered the role of business,
the role of government, and the role of society. As a result, the current situation with the tenuous
state of employment has marginalized the ability of individuals in the labor force to exert much
influence on the direction of the economy, and consequently, has eroded the balance in the
model.

The Business-Government-Society Relationship

From an economic perspective, an examination of the origins of the relationship among
business, the government, and society shed light on how these entities interact with and respond
to one another. Perhaps most importantly, the role of society—a relatively new stakeholder in
this trifurcated relationship—was reviewed in terms of how well, or how badly, it operationalizes
equity theory.
Heilbroner’s research (1972) identified production and distribution as the twin tasks of
the market. Heilbroner devised a three-dimensional production possibility diagram that showed
how output is divided among three entities: consumption, investment, and government. Visualize
a bowed-shaped sail or triangle that is pliable. As Heilbroner described:

3
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

Any place on the sail represents some combination of consumption, investment,

and government spending that is within the reach of the community. Any place
“behind” the surface represents a failure of the economy to employ all of its
resources. It is a graphic depiction of unemployment of men and materials. (pp.
440-441)
He went on to explain that the reasoning behind the bowed shaped curve lies in the changing
efficiency (pliability) of our resources as we shift them from one use or form of production to
another.
A generation later, Heilbroner and Milberg wrote about how many European countries
throughout the 1980s had experienced economic transformation through a development known
as “corporatism,” a term that did not refer to businesses dominating the economic system but
rather to the alignment of the aims and policies of business, government, and labor. Although
corporatism varied among nations, it featured two distinctive institutional changes. The first was
a social contract between management and labor, a contract intended to give as much security of
employment as possible to employees. The second change directly involved both management
and the government in the creation of agreements that aimed to strengthen a nation’s place in
world production. This latter aspect of corporatism involved the use of pooled labor forces,
“…thereby avoiding the prohibitive expense that would result if each producer tried to seize the
market for itself” (Heilbroner & Milberg, 1998, p. 126). To the knowledge of this paper’s
authors, European market forces, especially during the 1980s, signaled the acknowledgement of
labor, a portion of society, as an integral and third partner in the production and distribution
processes described earlier.
The U.S. government did not follow Europe’s direction of income distribution and
industrial nationalization. During the aptly named “Great Prosperity” years between 1947 and
1975 (Reich, 2010), the U.S. economy was robust, with the economy pushing toward full
employment, a progressive income tax, strong bargaining power among average workers, a
build-up of Social Security, and improved productivity—conditions that gained momentum
through Roosevelt’s New Deal and, later, after World War II. Notably, the wages of American
workers coincided with their output.
The business-government-society relationship was further refined in an early definition of
Corporate Social Responsibility (CSR) that emerged during the Great Prosperity. CSR held that
“social responsibility … requires the individual to consider his [or her] acts in terms of a whole
social system, and holds him [or her] responsible for the effects of his [or her] acts anywhere in
that system” (Davis, 1967, p. 45). In 1974, near the end of the Great Prosperity’s timeframe,
another researcher observed that the business community, willing to be subjected to an
increasing number of laws imposed by society, did not fully live by all of its social obligations:
The business community never has adhered with perfect fidelity to an
ideologically pure version of its responsibilities, drawn from the classical
conception of the enterprise in economic society, though many businessmen
[people] have firmly believed in the main tenets of the creed. (McKie, cited in
Carroll & Buchholtz, 2009, p. 37)
It is not surprising that over the course of several decades, the three sectors of business,
government, and society have undergone dramatic change. For example, the growing number of
anti-discrimination laws demanded by society and enacted by government has required
compliance within businesses. In addition, the stakeholders in the society sector have expanded
to include, but have not been limited to, special interest groups, community activists, employee

4
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

shareholders, and consumer advocates, all of whom exert varying amounts of pressure and
response from the other sectors.
Unfortunately, near the late 1970s and over the course of over three decades, output
continued to rise but hourly compensation declined (U.S. Census Bureau, 2011). Throughout the
course of this broad timeframe, globalization and technological changes affected many industries
in both positive and negative ways. However, one of the deepest concerns among contemporary
economists and public policy experts alike (Harvey, 2010; Hirsh, 2010; Krugman, 2000;
Prestowitz, 2010) is not the absence of jobs but the steady erosion of wages that is so starkly
pronounced among today’s growing number of persistently unemployed and underemployed
workers across all industry sectors and almost all levels of management.
Regardless of the consequences of the recent Great Recession, an examination of the
erosion of wages and benefits that comprise a large part of Americans’ total compensation will
form the rationale for revisiting the utility and effectiveness of equity theory in management
education and practice. Therefore, business, government, and society—the three segments of the
economic diagram formulated by Heilbroner and further explicated by other scholars—was
examined separately to determine why the theory has eroded in recent years.

The Business Sector

In the spring of 2007, a study conducted by Manpower Inc. that surveyed over 36,000
companies in 27 countries revealed that 41% of them were having difficulty in hiring workers
that they needed. The U.S. ranked fourth among the hardest hit countries, reporting a dearth of
employees in both sales representative and teaching positions (Coy & Ewing, 2007). At that
time, consumer spending skyrocketed and a global labor crunch ensued. In spite of increased
demand for goods and services, U.S. businesses provided more in-house training but also
increased outsourcing initiatives abroad. Later that year, the Great Recession unraveled the
economy.
The mainstream media attributed this latest recession to factors agreed upon by several
scholars who concur that it was
… mainly the consequence of poorly regulated financial institutions that went on
a highly leveraged spree of excessive risk-taking, destructive lending practices,
and the use of ill-advised exotic financial instruments. The national expansion
following the economy’s slump from 2001 to 2003 was dominated by
unsustainable and dangerous bubbles in housing and the financial markets. It was
also characterized by excessive borrowing by Americans struggling to maintain
their standard of living while their real wages fell. (Parrott, 2010, pp. 33-34)
In addition, the sub-prime mortgage crisis led to the collapse of the banking sector and a
synchronized slowdown in global economic activity (Chowdhury & Manzoor, 2010). It is safe to
conclude, then, that banking and financial institutions were the primary forces behind the
collapse of the U.S. economy and, to date, partially instrumental in the collapse of several non-
U.S. economies.
In terms of the principles of equity theory, the business sector has continued to disappoint
its employees over the course of several decades. Significantly, the demise of the social contract
ushered in its replacement: the employment-at-will doctrine. Today, no employer will offer a
guarantee of lifelong employment because the relationship between employer and employee is a
voluntary one that can be severed at any time by either party. There are only three exceptions to

5
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

employment at will. The first, public policy exceptions, are those that protect employees from
being fired because they refuse to commit crimes. The second are implied contract exceptions, in
which employees believe they have contracts or implied contracts from their employer, and these
may take the form of language within policy manuals, employee handbooks, and the like. The
third exception is the good faith principle, which “suggests that employers may run the risk of
losing lawsuits to former employees if they fail to show that employees had every reasonable
opportunity to improve their performance before termination” (Williamson & Kleiner, cited in
Carroll & Buchholtz, 2009, p. 667). While it is not the intention of this paper to cite the
advantages and disadvantages of the employment-at-will doctrine, it is believed that many of
these ephemeral employment relationships may certainly inhibit employees’ perceptions of
rewards and equitable compensation, especially in light of the absence of long-term loyalty.
While the business sector cannot bear the entire blame for the demise of the social
contract, it has contributed significantly to the recent erosion of employees’ expectations in terms
of both compensation and rewards. These contributions include the extreme increases in
executive compensation, layoffs, the erosion of heretofore-sacrosanct bargaining rights, and the
shift from permanent to temporary employment.

CEO and Executive Compensation

Without question, one of the most dramatic examples of the business sector’s
involvement in the erosion of equity theory is found in its distribution of income, a measure that
most workers use to identify inequitable treatment. In the 1960s, the ratio between top and
median pay was 30 to 1; in the 1990s, that ratio was more than 200 to one (Heilbroner &
Milberg, 1998, p. 167). In 2006, Executive Excess 2006 released its annual CEO compensation
survey conducted by the Institute for Policy Studies and United for a Fair Economy. The survey
reported that the ratio of CEO pay to the average worker was 411 to 1, and this ratio did not
include the value of stock and other awarded options (Anderson, Cavanaugh, Collins &
Benjamin cited in Carroll & Buchholtz, 2009). Assuming that preferred stock options and other
forms of deferred compensation for CEOs would increase the aforementioned ratio is rational.
In 2008 and at the height of the recession, a report released by the New York State
comptroller’s office stated that executives within financial companies in New York collected an
estimated $18.4 billion in bonuses for that year (White, 2009). It is public knowledge that the
brokerage units of these companies lost billions in that same year. Corporate governance experts
and the general public questioned why companies that accepted taxpayer money paid any
bonuses at all while simultaneously laying off thousands of workers, while financial industry
leaders contended that they needed to pay their best people in order to retain them. Lucian A.
Bebchuk, a professor at Harvard Law School and expert on executive compensation, called the
2008 bonus figures “disconcerting” and, in direct correlation with the precepts of equity theory,
said, “… bonuses … are meant to reward good performance and retain employees. But Wall
Street disbursed billions despite staggering losses and a shrinking job market” (cited in White, p.
2).
As other journalists (Browning, 2009; Foroohar, 2010) noted throughout the recession,
executives who were willing to terminate workers also seemed to be the least likely to reexamine
their own compensation. As one of them dryly reported, “The CEOs of the 50 firms that laid off
the most workers since the onset of the economic crisis took home 42 percent more pay in 2009
than their peers did—largely because cutting workers boosts short-term profits and appeals to
Wall Street” (Foroohar, p. 20).

6
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

Over 30 years ago, the legendary management theorist Peter Drucker remarked that once
CEO-to-worker pay ratios went above 25:1, major moral questions should be raised. He stressed
making employees believe that “we’re all in this together” becomes harder when public
documents reveal that company leaders largely remove themselves from personal financial risk
(Drucker, 1977).

Layoffs: A Common Practice

For over two decades, academicians and business management experts have warned of
both the economic and managerial repercussions of layoffs, restructurings, and short-term profit
at the expense of whole populations of professional workers. Alan Downs’ Corporate Executions
(1995) documented the financial and social wreckage of layoffs, and Charles Heckscher’s White
Collar Blues (1996) followed shortly thereafter with mid-management’s response to corporate
downsizing and restructuring. While Dangerous Company (O’Shea & Madigan, 1997) unveiled
the advantages and disadvantages of large consulting firms and their work ethic, Richard
Sennett’s The Corrosion of Character (1998) warned of the destruction of sustained purpose,
integrity of self, and trust in the workplace.
One of the most recent indictments of layoffs recently appeared as a book excerpt in the
popular press, written by Jeffrey Pfeffer, professor of organizational behavior at Stanford
University’s Graduate School of Business. Pfeffer dispassionately examined both the myths and
realities of layoffs and concluded that layoffs do not increase stock prices, profitability, or
productivity. Rather, they increase costs, reduce morale, increase fear, and, perhaps most
importantly, “literally kill people” (Pfeffer, 2010, p. 37).

The Permanently Temporary Employee

As noted previously in this paper, the recent recession has accelerated trends that already
had been diminishing the economic standing of both managerial and non-managerial workers in
the U.S. In addition to meager pay gains and less job security, permanent positions across the
employment spectrum are in jeopardy.
According to Peter Cappelli, Director of the Center for Human Resources at the
University of Pennsylvania’s Wharton School, “Employers are trying to get rid of all fixed costs.
First, they did it with employment benefits. Now they’re doing it with the jobs themselves.
Everything is variable” (cited in Coy, Conlin, & Herbst, 2010, p. 29). Because employers are
loath to add permanent workers to their list of fixed costs, temporary employment is one of the
few sectors of the labor market that is growing rapidly. It is public knowledge that while Boeing,
in 2009, cut 1,500 contingent workers from its commercial division, it also hired 1,500 workers
from across India to staff a new research and development center in Bangalore.
The trend toward permanently temporary employment has been developing for many
years because the increased use of bonuses tied to short-term vs. long-term profit performance
gives managers an incentive to cut fixed labor costs. Furthermore, without the shackles of
benefits that include but are not limited to health insurance or a retirement plan (topics that will
be addressed later in this paper) employers can shed temporary workers when they are no longer
needed.
Sadly, many involuntary temporary workers must secure one or more jobs to come close
to matching what they may have earned in a previous (permanent) position, and these workers
are part of the growing number of underemployed in the U.S. In contrast, many workers who are
fortunate to have full-time positions are beginning to shows signs of demoralization, the “flip

7
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

side” of one of equity theory’s fundamentals: the perception of rewards. An example of how
poor morale can affect performance was discovered when UBS, Credit Suisse, and American
Express hired Harvard psychology lecturer Shawn Achor to train their employees in positive
thinking. According to Achor: “All the employees had just stopped working” (cited in Coy et al.,
2010, p. 1).
As discussed, egregious increases in executive compensation, the persistence and
increased reliance on layoffs, and the predicted continuation of temporary employment
arrangements clearly have placed the operationalization of equity theory in jeopardy. The next
section of this paper demonstrates how the government sector is responding to current
employment practices in general and subsequent effects on equity theory, in particular.

The Government Sector

Several of the actions as well as the inactions of the Federal Government have played a
major role in the shift in the macroenvironment.

Handling of Corporate Fraud

Recent literature in the area of business ethics has attempted to examine the reasons why
corporate fraud is committed with such high frequency. In the context of the various theories on
motivation, research (e.g., Cohen, Ding, Lesage, & Stolowy, 2011) detailed that managers are
motivated to commit fraud at the expense of their employees simply because of the incentives
that exist to do so. Moreover, as it specifically applies to the breakdown of equity theory, Stein
(2011) indicated that justice fails in the workplace not only because of the difficulty in
implementing effective rewards schemes but also because of the difficulty of implementing
effective penalty schemes. Firms today simply do not have the appropriate checks and balances
in place.
Bales and Fox (2011) emphasized that unintentional fraud does not exist. In basic terms,
what separates error from fraud is intent. Needless to say, the financial crisis of 2008-2009 drew
attention to myriad errors that were perpetrated across American industry for which society had
to pay a steep price. According to propublica.org, as of June 2011 the $700 billion Troubled
Asset Relief Program (TARP) had provided federal bailout funds to roughly 1,000 recipients,
with the greatest disbursements going to Fannie Mae ($99 billion), AIG ($68 billion), Freddie
Mac ($64 billion), General Motors ($51 billion), Bank of America ($45 billion), Citigroup ($45
billion), JP Morgan Chase ($25 billion), Wells Fargo ($25 billion), GMAC ($16 billion),
Chrysler ($11 billion), Goldman Sachs ($10 billion), and Morgan Stanley ($10 billion). While
the operating practices that placed these organizations in financial trouble were not necessarily
fraudulent in the strict sense of the word, many of these practices clearly were careless or
negligent. A key argument in support of the bailouts is that they are in the national interest.
Some, of course, would argue otherwise.
Corporate fraud has been a prominent part of the corporate landscape over the last
decade. Among its most notorious symbols are the following firms:
Enron. The energy company’s collapse directly led to the passage of the Sarbanes-Oxley
Act of 2002. Its founder, Ken Lay, was found guilty of 10 counts of conspiracy and fraud in
2006. He suddenly died while awaiting sentencing.

8
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

WorldCom. At the time of its 2002 filing, this telecommunications company’s

bankruptcy was the largest in U.S. history. CEO Bernard Ebbers was sentenced to 25 years in
prison in 2006.
Adelphia. The large cable television company, whose assets were later acquired by Time
Warner and Comcast, was dissolved following a number of securities violations. Its founder,
John Rigas, was sentenced to 15 years in prison in 2005.
Tyco. Former CEO Dennis Kozlowski was convicted on 29 counts for the theft of more
than $150 million from the company. He was sentenced from 8 to 25 years in prison in 2005.
These four organizations are just the tip of the iceberg. Also reported have been countless
cases of corporate wrongdoing, from sexual impropriety to spying on competitors, where the
effects have rocked organizational stakeholders such as its investors and, often most severely, its
employees.

Regulation
One of most significant pieces of legislation passed in the aftermath of the financial crisis
was the Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law
by President Barack Obama in July 2010. Among its components, Dodd-Frank imposed limits on
proprietary trading; required new disclosures for third-party debt instruments; set more stringent
capital requirements for financial firms; introduced tighter mortgage lending practices; and
established the Financial Stability Oversight Council and the Office of Financial Research as
new regulatory agencies. Critics of Dodd-Frank, however, claimed that the legislation was so
diminished when it passed that they were uncertain whether it would have a material impact.
Moreover, the presumption was that the mistakes that caused the financial crisis were made
exclusively by private firms. By failing to extend the blame to government agencies such as the
Securities and Exchange Commission, Dodd-Frank’s creators ignored regulatory missteps that
helped foster the crisis (Mello, 2011). In the end, taxpayers paid a high price for the enormous
losses in the banking industry, and there is no guarantee that public policy in a heavily partisan
political environment will truly be able to serve the public welfare.
An indicator of just how difficult it is to establish meaningful reform on behalf of society
can be seen in a scathing article in Newsweek (2011) that reported that the banking industry paid
lobbyists $1.3 billion in the year leading up to the passage of Dodd-Frank. The article explained
why:
Maybe the miracle is that Dodd-Frank passed in the first place. The financial
services sector was hit hard by the economic meltdown, so banks spent less on
lobbyists and in campaign contributions, according to watchdog organizations that
monitor outside spending on politics. But by all accounts that slowdown was
brief. As soon as reform became a threat in 2009, banks ratcheted up spending
again. Luckily, they had plenty of cash on hand—courtesy of the federal bailout.
(Rivlin, 2011, p. 11)
The partisan environment in Washington is further illustrated by the long-awaited report
of the Financial Crisis Inquiry Commission, which was published in January 2011. The
commission was intended to provide useful information as to the causes of the financial crisis,
but instead it generated multiple reports that contained disparate views on deregulation,
egregious executive compensation, excess debt, risk management, the government’s
subsidization of mortgage loans, and the housing bubble, all divided along party lines (Partnoy,
2011). With no satisfactory answers, it is not surprising that society suffers and that members of

9
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

the workforce are becoming increasingly discouraged about the apparent lack of justice in the
economy.

Job Creation
Perhaps more than any other issue, the 2012 Presidential election will hinge on the
problem of job creation. The July 2011 jobs report issued by the U.S. Department of Labor was
extremely disappointing, and the promise of the economic stimulus that was such an early
breakthrough in the Obama administration has met with ongoing disappointment. When coupled
with the imbroglio over the country’s debt—not to mention the severe debt problems that have
recently created alarm throughout the global economy—forecasts for economic growth have
been bleak. (At the time of this writing, Standard & Poor’s has just removed the United States
government from its list of risk-free borrowers for the first time in history.) With no rescue for
the dire employment situation in the near term, the American public easily can exercise its
frustration in the polls.
State governments have struggled to avoid raising taxes on businesses in order to cover
huge deficits for unemployment payments. In New Jersey, the deficit automatically would have
triggered the highest possible tax rate on July 1, 2011, but the state Senate passed a bill (NJ
Senate bill 2730) for its bankrupt state unemployment insurance fund that called for employers to
pay an extra $58 per employee in 2011 instead of $177 per employee if no legislative action had
been taken (Rizzo, 2011). The tradeoff is that a payment schedule was created where the costs to
employers would gradually climb over the next three years.
In addition, state governments have ventured into uncharted territory under the premise
of easing their financial troubles by threatening to remove collective bargaining rights of
workers. When this threat occurred in the state of Wisconsin in February 2011, it created outrage
throughout the country because society could see further evidence of erosion in the democratic
principles that also are a cornerstone of equity theory.
Former Treasury Secretary Lawrence Summers (2010) pointed out that the expansion of
the 2000s created only one-third as many jobs as the expansion of the 1990s did, which suggests
grounds for cyclical concerns about employment creation. Summers also acknowledged
structural concerns, and he suggested a number of areas in which the government can increase
demand in order to generate an expansion in jobs: direct public investment; support for private
investment; support for exports; support for U.S. consumers; leveraging long-term investment in
renewable energy; improvement in the quality of capital in U.S. financial institutions; and
increased emphasis in our education system. This list is imposing, to be sure; yet, if these areas
do succeed in yielding new jobs, there is no assurance that the problem of underemployment will
be eradicated.

Structural Changes in the Global Economy

A monumental challenge for the U.S. is to forge an expansion in the face of a global
economy where jobs are routinely being lost to lower wage countries. A recent Wall Street
Journal article elaborated on Summers’ concerns about the seriousness of the structural
economic changes that have evolved and offered an ominous conclusion:
During the two decades before the crisis of 2008-09, the U.S. economy added 27
million jobs, primarily in government, health care, construction, retail and
hospitality. This employment growth was almost all in the “nontradable” side of
the economy—sectors generating goods and services that must be consumed

10
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

where they are produced. But several factors will depress these sectors.
Government budget woes, a likely leveling-out of the dramatic growth in
healthcare consumption, and a permanent reduction in domestic consumption as
asset prices reset downward and debt-financed purchases are reduced, will all
have effects in the short-to-medium term.
The “tradable” side of the economy (which includes exportable goods and
services) has its own set of issues. While finance, consulting, computer design
and managing complex international businesses all fueled job growth for 20 years,
these gains were matched by declines in the manufacturing jobs held by the
middle class. The very things that propped up our tradable sectors through the
export market—high growth rates in emerging economies and a more educated
consumer class in those countries—have challenged middle class U.S. employees
on the job front. Emerging markets are now increasingly moving up the value
chain with improved skills, and it’s likely that higher paying jobs—including
design and even product development—will move abroad in greater numbers.
A stimulus package that temporarily restores elements of pre-crisis
demand is unlikely to generate the escape velocity needed to get out of the jobs
hole. Nontradable job growth can’t mask the declines in the tradable sector
anymore. (Spence, 2011, p. A11)
A recent Forbes article stated that a stimulus designed to create jobs today faces a much
different set of challenges than a stimulus in the 1930s. The crux of the problem is the
differential in wages:
The average wage in India is roughly 40 cents an hour, and in China it’s about $2.
Here in the U.S. the average wage is $20 plus $1.24 in Social Security tax. Add it
all up and an engineer in Bangalore costs $12,000 a year compared with $90,000
in the U.S. This big problem will haunt our employment market for the
foreseeable future. (Dreman, 2011, p. 58)
With employment in the U.S. obviously being squeezed, there is little doubt that many
workers are being forced to settle for underemployment.

Healthcare Benefits
The all-too-often used phrase “Obamacare” is clearly a pejorative one, and like the 2009
stimulus package, this multifaceted piece of legislation is likely to define a sizable part of the
Obama legacy. Elwood (2010) stated, “As components of the law unfold over the next decade,
thousands of pages of regulations must be written to explain how to implement the various
provisions in the 906-page engrossed version of this legislation” (p. 65). He also noted the
following, with more than a touch of sarcasm: “The Patient Protection and Affordability Act,
H.R. 3509, that was signed into law by President Obama in March 2010 might just as easily have
been subtitled the Attorneys, Accountants, Lobbyists, and Public Relations Personnel Relief Act
of 2010” (p. 65).
Complex times call for complex measures. Without question, the cost of healthcare in the
U.S. increasingly is having far-reaching consequences for workers. According to the American
Public Health Association (2008), a report of the Robert Wood Johnson Foundation found that
from 2001 to 2005, the average cost of family medical insurance coverage increased nearly
$2,500, while the median income of those holding the family insurance policy increased by only
$1,250. Moreover, the percentage of family premiums that employers paid between 2001 and

11
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

2005 remained level, while the amount that workers pay for family premiums rose by about
$665. The report also found that from 2001 to 2005, more than 4 million fewer people held
private sector jobs that offered health coverage, and 30,000 fewer private sector employers
offered coverage.
Reports such as this one point to the deteriorating bargaining power of employees in the
workforce. The utility of equity theory is brought into question when employees have to accept
and remain in jobs for which they are ill suited simply to have access to healthcare benefits. For
a significant percentage of the population without employment, the option of medical insurance
is cost prohibitive. In addition, with employers relying more on part-time and temporary jobs as
an operating strategy, more working families have found themselves without benefits.

The Society Sector

A third and final sector of the economic relationship is society. Although “society” is a
broad term that includes both employed and non-employed groups, this paper focused on the
members who have a direct stake in the employer-employee relationship because equity theory
deals with rewards associated with work-related effort and productivity.
In November 2010, the Labor Department reported that private companies added 50,000
jobs; however, most of those increases occurred in the temporary help and health-care sectors
(Rich, 2010), and many of these new positions were outsourced to create leaner business models
(Employee Benefit Research Institute, 2011; Reddy, 2011). As underscored earlier in the
business sector, the increased use of temporary workers creates insecurity among companies that
would rather use contract workers than permanent employees. Admittedly, the Great Recession
wrought havoc within most industries in the U.S. and, over the course of the last few years,
within other global economies as its ripple effects widened. Questions linger, though, about the
decisions made by businesses regarding their workers. Do employees exert influence as integral
stakeholders in the business-government-society relationship and, in the context of this paper,
would the persistent diminishment of their wages and benefits also challenge the use of equity
theory as one tool in management’s arsenal of motivational strategies?

Wages
Reich (2010) stressed that the past 35 years have been marked by generally strong growth
in productivity; however, most working people have not seen comparable gains in their wages
and benefits. To illustrate this observation, the Economic Policy Institute (EPI) reported that, for
the first time on record, real incomes of middle-class families actually declined over the course
of the last business cycle from 2001 to 2007, intensifying stagnant wage growth since the early
1970s. Between 1945 and 1970, when average annual income grew by $18,474, the richest 10%
received 30% of the growth while the income for the bottom 90% increased by 70%. However,
between 1970 and 2008, average annual income grew by $12,300 (Jacobs & Hacker, 2011). In
short, income growth has accrued to the richest 10% of the population while income for the
remaining 90% declined.
To date, there are no indicators that these trends are improving the wage potential for
most working Americans. As more workers are added to the ranks of the unemployed and
underemployed, inequitable wage distributions will affect their ability to advance in their careers.
For example, in a study conducted by the John J. Heldrich Center for Workforce Development at
Rutgers University, Americans across the country who were unemployed since August of 2009

12
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

were interviewed about their job status twice over a 15-month timeframe. As of November 2010,
only one-third of the participants found replacement jobs, but 29% took a reduction in fringe
benefits, and those who had to switch careers lost more: almost half of these workers (46%)
suffered cuts in benefits compared with 29% who stayed in the same career (Godofsky,
VanHorn, & Zukin, 2010).
Another issue associated with the diminishment of wages is workers’ ability to relocate
where there is employment and opportunity for advancement. Many would argue that
unemployment has increased employers’ payouts in terms of unemployment insurance,
outplacement counseling services, and pre-employment, contractually carved-out severance
packages. However, a report by London-based Capital Economics stated that “supply
problems—the workers who need jobs are in the wrong states, and the wrong fields—could be
responsible for nearly a third of America’s unemployment rate” (Foroohar, 2010, p. 20).
Assuming this report was accurate, it stands to reason that many American workers who are
unemployed, underemployed, or facing serious financial or housing-related problems will be
unable to incur the costs of relocation elsewhere.

Pensions
When Congress created the 401(k) savings plan in the late 1970s, employers quickly
realized that they no longer had to worry about contributing to the defined contribution plans that
dominated the pension system. These 401(k) plans became substitutes for defined benefit and
defined contribution plans, both of which had increased employers’ costs. By 2005, there were
more 401(k) plans than defined contribution plans, and today, there are approximately twice as
many (Klein, 2010). This cost shifting has created a greater burden for individual workers and a
smaller burden for the government and private employers.
However the costs are shifted, they do not ameliorate the cost of retirement. As the
retirement age slowly has ratcheted upward, consideration has not been given to the difficulty
encountered by many older workers who face extended unemployment or, when they are hired,
low-paying part-time employment. In addition, another challenge faced by older workers is
accumulated credit card debt as a result of increased medical expenses and insufficient savings
(Mont, 2011).
Today, the types of companies that traditionally provided defined contribution plans are
in financial trouble; the majority of companies filing for bankruptcy now are under-funded; and
changes in bankruptcy laws have allowed companies to shed their pension liabilities (Hawthorne,
2008). Prophetically, Hawthorne’s observations of the reduction of labor unions’ negotiating
power in failing industries are now evident in recent attempts to eliminate the collective
bargaining rights of public workers in a number of U.S. states, as described earlier.

The Importance of Future Generations

Since the beginning of the Great Recession, job losses have impacted both skilled and
unskilled employees across the country and in a wide range of industries and disciplines. While
the population of deeply experienced and well-educated workers who face continued
underemployment is disturbing, so, too, is the population of entry-level, well-educated workers
who are skeptical about their own professional development and employment prospects.
In terms of professional development, the 2010 Employee Job Satisfaction survey report
conducted by the Society for Human Resource Management (SHRM) revealed that 19% of
workers in both Generation X (born between 1965 and 1980) and Generation Y (the Millennial

13
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

generation) reported dissatisfaction with their jobs, up from 11% for both groups in 2008. Survey
data also noted how older groups of workers putting off retirement to recoup losses in their
retirement portfolios are affecting the Generation X and Generation Y groups, many of whom
feel that their career development has eclipsed because of fewer positions opening up higher on
the career ladder (Schramm, 2010). This decline in career opportunities for younger workers and
its potential for stirring generational conflicts most certainly will challenge hiring managers in
the future.
The ability to save through investment also has affected younger workers. According to
the Employee Benefit Research Institute’s February 2011 analysis of 40l(k) balances and
changes due to market volatility, the percentage of workers between the ages of 25 to 34 who say
they have saved for retirement dropped from 53.3% to 32.7%, more than 20%, in the last decade.
Finally, future employment prospects for potential workforce entrants are not positive.
The American Freshman: National Norms Fall 2010 is a survey designed to measure the
emotional health of college freshmen; it is renowned for its size (200,000 incoming full-time
students at four-year colleges) and longevity (25 years of data collection). In 2010, the
percentage of students who said their emotional health was above average fell to 52%; in 1985, it
was 64%. Brian Brunt, director of counseling at Western Kentucky University and president of
the American College Counseling Association, stated that “… today’s economic factors are
putting a lot of extra stress on college students, as they look at their loans and wonder if there
will be a career waiting for them on the other side” (Lewin, 2011, p. A1).
Clearly, the decrease or complete extinction of work-related benefits defies the position
of a large portion of the society sector—namely, employees—in the business-government-
society relationship because it places them in a disadvantageous and vulnerable position. It is
important to emphasize that the “cost” of unemployment and underemployment is not only
economic but also emotional. Furthermore, the psychosocial ramifications of the current
employment landscape combined with the increased publication of their effects on future
generations have yet to be studied or completely quantified. Some researchers (e.g., McKee-
Ryan & Harvey, 2011) have begun to examine the various dimensions of underemployment, but
the authors of this paper suspect that recent economic phenomena will be the source of research
studies across a number of academic disciplines for years to come.
Written by a 24-year-old, a recent article in The New York Times captured some strong
sentiments that appear to represent the young, educated workforce in the following:
The millions of young people who cannot get jobs or who take work that does not require
a college education are in danger of losing their faith in the future … Even if the job
market becomes as robust as it was in 2007—something economists say could take more
than a decade—my generation will have lost years of career-building experience. (Klein,
2011, p. A25)
If Klein’s remarks are accurate, the presence of apathy in the workforce portends the disutility of
equity theory in the future.

Discussion

In 2009, the Bureau of Labor Statistics and other publicly available documents reported
that the unemployment rate was pinned at or above 9%, and that the number of jobs the
American economy needed to create in order to return to pre-recession unemployment of 5% was
11 million. Ironically, on July 12, 2011, the Labor Department announced that hiring has not

14
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

improved at all this year; the jobless rate is still pinned at or near 9%; and, as noted by
economists at Credit Suisse, almost 11 million workers are still unemployed (Madigan, 2011).
Clearly, these data do not bode well for the current state of America’s economic or employment
affairs.

Recommendations for Restoring Equilibrium

The business-government-society relationship dramatically and negatively has changed
over time. The balance that once existed among the three sectors is clearly no longer evident,
given the diminished power of the society sector. The apparent breakdown in our model is
illustrated in Figure 2.

Business Government
Rampant greed escalated partisanship
executive compensation ineffective regulation
layoffs mishandling of corporate fraud
demise of the social contract lack of job creation
shift to temporary workforce structural change
union erosion healthcare legislation

Society
unemployment
increased underemployment
erosion in equity
loss of benefits
cost-shifting of healthcare
pension dumping
apathy caused by psychosocial forces
Figure 2. The Business-Government-Society Triangle Today

It is important to reiterate that the three sectors are pliable, and they expand or contract
according to the forcefulness of their strengths or weaknesses. To restore equilibrium to this
relationship, the following recommendations should be considered:

15
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

Carefully study the companies that are started or managed by visionary leaders who
are in touch with the needs of their employees. Instead of focusing on the most recent quarter’s
profits, these business executives focus on the long-term sustainability of both their businesses
and the employees who work with (versus for) them.
The government sector needs to reinvigorate the growth of start-ups in the business
sector. The lifeblood of America’s economic growth has occurred through start-up companies.
Repeatedly, many large companies collapse because of their inability to remain both profitable
and equitable to their stakeholders. While start-up firms may pose significant financial risks, they
appeal to pioneers who want to create and become part of something new. The challenges
associated with this recommendation are that venture capital for start-ups is scarce and that bank
loans are increasingly more difficult to acquire.
Corporate cultures need to be re-examined or redefined to mend the imbalance
between employers (the business sector) and employees (the society sector). In a provocative
interview, Edgar Schein, professor emeritus of MIT’s Sloan School of Management and an
expert in creating strong organizational cultures, emphasized the need for behavioral change at
all levels of an organization. He noted that it is not enough to have an empowering process;
rather, everyone—supervisors, middle managers, and senior executives—must actively work to
create behaviors that encourage a mutual helping relationship and establish equal partnerships
within an enterprise (Kleiner & vonPost, 2011).
Many government and business leaders believe that businesses are living entities that
sustain and support themselves. If this is credible thinking, then why are so many businesses
choosing to die or make others suffer? Businesses are invented by people who create, shape,
correct, grow, and nurture them. Perhaps it is time to reactivate societal traits within businesses
and to achieve a state of collaborative interdependence.
The recent scandal involving Rupert Murdoch’s illegal media activities has prompted
many journalists to apply a line from an old fairy tale: “The emperor has no clothes.” Ironically,
this same statement could be applied to those who are now “exposed” for egregiously harming
the delicate balance of the business-government-society relationship. Let us hope that American
society will demand its business and government leaders restore the balance.

Recommendations for Future Research

This paper has examined the confluence of forces that severely inhibit the use of equity
theory in contemporary management practice and management education. Because this is a
viewpoint paper, the authors strongly recommend that other researchers refine what is posited
here with quantifiable data that validate these observations. Regardless of the specific nature of
future studies, equity theory should be given its rightful place in management history versus
active practice.

References

Adams, J. S. (1963). Toward an understanding of inequity. Journal of Abnormal and Social

Psychology, 67, 422-436.
American Public Health Association. (2008). The Nation’s Health, 38, 7.
Anderson, W. D., & Patterson, M. L. (2008). Effects of social value orientations on fairness
judgments. The Journal of Social Psychology, 148, 223-245.

16
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

Anderson, S., Cavanaugh, J., Collins, C., & Benjamin, E. (2009). Executive excess 2006:
Defense and oil executives cash in on conflict. In A. B. Carroll & A. K. Buchholtz (Eds.),
Business & society: Ethics and stakeholder management (7th ed.) (p. 129). Mason, OH:
South-Western Cengage Learning.
Anonymous. (2011, January 13). Still patchy: American firms are hiring again, but hold the
cheers. The Economist. Washington, DC. Print Edition.
Bales, K., & Fox, T. L. (2011). Evaluating a trend analysis of fraud factors. Journal of Finance
and Accountancy, 5, 1-10.
Browning, L. (2009). Ex-UBS banker seeks billions for blowing whistle. The New York Times.
Retrieved November 29, 2010, from https://www.nytimes.com
Chowdhury, M. E., & Manzoor, S. H. (2010). A comparative analysis of recent U.S. recessions:
Evidence from secondary data. The Business Review, 16, 268-274.
Clogg, C. C., Eliason, S. R., & Leicht, K. T. (2001). Analyzing the labor force: Concepts,
measures, and trends. New York, NY: Kluwer Academic/Plenum.
Cohen, J., Ding, Y., Lesage, C., & Stolowy, H. (2010). Corporate fraud and managers’ behavior:
Evidence from the press. Journal of Business Ethics, 95, 271-315.
Coy, P., Conlin, M., & Herbst, M. (2010), The disposable worker. BusinessWeek. Retrieved
April 13, 2011, from
http://www.businessweek.com/magazine/content/10_03/b4163032935448.htm
Coy, P., & Ewing, J. (2007, April 9). Where are the workers? BusinessWeek, 28-31.
Davis, K. (1967, Winter). Understanding the social responsibility puzzle. Business Horizons, 45-
50.
Downs, A. (1995). Corporate executions. New York, NY: American Management Association.
Dreman, D. (2011, July 18). Bernanke’s last stand. Fortune, 58.
Drucker, P. (1977, May 23). Is executive pay excessive? The Wall Street Journal (1889-Current
file): ProQuest Historical Newspapers, 20.
Elwood, T. (2010). Health reform and its aftermath. Journal of Allied Health, 39, 65-71.
Employee Benefits Research Institute. (2011, February 1). 401K balances & changes due to
market volatility. Retrieved May 24, 2011, from
http://www.ebri.org/pdf/february%201,%202011%20update%20full%20universe.pdf
Fieldhouse, A. (2011, April 6). EPI briefing paper. Retrieved June 15, 2011, from
http://www.epi.org/pages/searchresults?cx=015558559618892733220%3Ai4e_hgfdlha&
cof=FORID%3A9&ie=UTF-8&q=1970-2008+annual+income+growth#239
Foroohar, R. (2010, October 4). Where the jobs are. Newsweek, 20.
Gallup Poll on unemployment and underemployment. Retrieved August 6, 2011, from
http://www.gallup.com/poll/141770/Underemployment-Steady-July.aspx
Godofsky, J., VanHorn, C., & Jukin, C. (2010). The shattered American dream: Unemployed
workers lose ground, hope, and faith in their futures. Retrieved January 3, 2011, from
https://www.heldrich.rutgers.edu
Handy, C. (1976). Understanding organizations. London, England: Penguin Books.
Harvey, D. (2010). The enigma of capital and the crises of capitalism. New York, NY: Oxford
University Press.
Hawthorne, F. (2008). Pension dumping: The reasons, the wreckage, the stakes for Wall Street.
New York, NY: Bloomberg Press.
Heckscher, C. C. (1996). White collar blues: Management loyalties in an age of corporate
restructuring. New York, NY: Basic Books.

17
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

Heilbroner, R. (1972). The economic problem (3rd ed.). Englewood Cliffs, NJ: Prentice-Hall.
Heilbroner, R., & Milberg, W. (1998). The making of economic society (10th ed.). Upper Saddle
River, NJ: Prentice-Hall.
Herzberg, F. (1966). Work and the nature of man. Cleveland, OH: Holland.
Hirsh, M. (2010). Capital offense: How Washington’s wise men turned America’s future over to
Wall Street. Hoboken, NJ: John Wiley & Sons.
House, R.J. (1971). A path-goal theory of leader effectiveness. Administrative Science
Leadership Review, 16, 321-339.
Jacobs, E., & Hacker, J. (2011). The rising instability of American family incomes, 1969-2004:
Evidence from the panel study of income. Economic Policy Institute. Retrieved October
9, 2011, from http://www.epi.org/publications/bp213/
Klein, E. (2010, December 6). The great risk shift: Your retirement is now your problem.
Newsweek, 18.
Klein, M.C. (2011). Educated, unemployed and frustrated. The New York Times. Retrieved
March 21, 2011, from http://www.nytimes.com/2011/03/21/opinion/21klein.html
Kleiner, A., & vonPost, R. (2011, January 19). A corporate climate of mutual help. Strategy &
Business. Retrieved February 17, 2011, from http://www.strategy-
business.com/article/11102?pg=all&tid=27782251
Krugman, P. (2000). The return of Depression economics. New York, NY: W.W. Norton &
Company.
Lewin, T. (2011). Record level of stress found in college freshmen. The New York Times.
Retrieved January 31, 2011, from
http://www.nytimes.com/2011/education/27colleges.html?emc=eta1&pagewanted=p...
Madigan, K. (2011, July 21). Job cutters may reap what they sow. The Wall Street Journal.
Retrieved July 13, 2011, from http://blogs.wsj.com/economics/2011/07/12/job-cutters-
may-reap-what-they-sow/tab.print/
Maslow, A. H. (1943). A theory of human motivation. Psychological Review, 50, 370-396.
McClelland, D. C. (1961). The achieving society. Princeton, NJ: Van Nostrand.
McGregor, D. (1960). The human side of enterprise. New York, NY: McGraw-Hill.
McKee-Ryan, F. M., & Harvey, J. (2011). “I have a job, but…”: A review of underemployment.
Journal of Management, 37, 962-966.
McKie, J. W., (2009). Changing views. In A. B. Carroll & A. K. Buchholtz, (Eds.), Business &
society: Ethics and stakeholder management (p. 481) (7th ed.). Mason, OH: South-
Western Cengage Learning.
Mello, Jr., J. P. (2011, Winter). Poor aim: How Dodd-Frank missed half the target. Boston
College Magazine, 34-35.
Mont, J. (2011, January 10, 17). Retiring in the red. Newsweek, 10.
O’Shea, J., & Madigan, C. (1997). Dangerous company: The consulting powerhouses and the
businesses they save and ruin. New York, NY: Times Books/Random House.
Parrott, J. (2010, May-June). New York City’s tale of two recessions, Challenge, 53, 32-48.
Partnoy, F. (2011, January 29). Washington’s financial disaster. The New York Times. Retrieved
August 1, 2011, from http://www.nytimes.com/2011/01/30/opinion/30partnoy.html
Pfeffer, J. (2010, February 15). Layoffs are bad for business. Newsweek, 34-37.
Prestowitz, C. (2010). The betrayal of American prosperity. New York, NY: Free Press/Simon &
Schuster.

18
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

Propublica. (2011). Where is the money?: Eye on the bailout. Retrieved July 11, 2011, from
http://www.propublica.org/ion/bailout
Reddy, S. (2011). Downturn’s ugly trademark: Steep, lasting drop in wages. The Wall Street
Journal. Retrieved January 18, 2011, from
http://online.wsj.com/article/SB10001424052702304248704575574213897770830.html
Reich, R. (2010). After-shock. New York, NY: Alfred A. Knopf.
Rich, M. (2010, December 3). Few new jobs as jobless rate rises to 9.8%. The New York Times.
Retrieved December 6, 2010, from
https://www.nytimes.com/2010/12/04/business/economy/04jobs.html?_r=1&emc=etl&pa
Rivlin, G. (2011, July 11). The billion-dollar bank heist: How the financial industry is buying off
Washington—and killing reform. Newsweek, 9-11.
Rizzo, S. (2011, May 13). Bill eases tax hike for Jersey’s jobless fund. The Star-Ledger, 1.
Schramm, J. (2010). Post-recession job dissatisfaction. HRMagazine, 55(7), 88.
Sennett, R. (1998). The corrosion of character: The personal consequences of work in the new
capitalism. New York, NY: W.W. Norton.
Shore, T., Sy, T., & Strauss, J. (2006). Leader responsiveness, equity sensitivity, and employee
attitudes and behavior. Journal of Business and Psychology, 21, 227-241.
Spence, M. (2011, June 24). Why the old jobs aren’t coming back. The Wall Street Journal, 11.
Stein, A. (2011). The flawed probabilistic foundation of law and economics. Northwestern
University Law Review, 105, 199-260.
Summers, L. (2010). Principles for economic recovery and renewal. Business Economics, 45, 3-
7.
Till, R. E., & Karren, R. (2011). Organizational justice perceptions and pay level satisfaction.
Journal of Managerial Psychology, 26, 42-57.
United States Census Bureau. 2011 statistical abstract. Retrieved July 12, 2011, from
http://www.census.gov/compendia/statab/2011/2011edition.html
United States Department of Labor. Bureau of Labor Statistics. Economic News Release.
Retrieved August 6, 2011, from https://www.bls.gov/news.release/empsit.t15.htm
Vasse, J. R. (2010). Monetary motivation, performance and job satisfaction. Journal of Applied
Management and Entrepreneurship, 15, 118-120.
Vroom, V. H. (1964). Work and motivation. New York, NY: John Wiley and Sons.
White, B. (2009, January 26). What red ink? Wall Street paid hefty bonuses. The New York
Times. Retrieved January 30, 2009, from
https://www.nytimes.com/2009/01/29/business/29bonus.html?scp=1&sq=What%20Red
%... /
Williamson, J. A., & Kleiner, B. H. (2009). New developments concerning the covenant of good
faith and fair dealing. In A. B. Carroll, & A. K. Buchholtz (Eds.), Business & society:
Ethics and stakeholder management (7th ed.) (p. 667). Mason, OH: South-Western
Cengage Learning.

19
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

About the Authors

Rongbing Huang, Ph.D., is an Associate Professor of Finance at Kennesaw State University.

He obtained Ph.D. in Finance from the University of Florida. His research focuses on corporate
finance and investments, especially investment banking and capital structure. He has published
in the Journal of Financial and Quantitative Analysis (JFQA), Journal of Corporate Finance,
and Financial Markets, Institutions & Instruments. He received the JFQA William F. Sharpe
Award in 2009.

Gurumurthy Kalyanaram (GK), Ph.D., received his Ph.D. from MIT Sloan School of
Management. He is a management consultant and currently the Dean of Amrita School of
Business. He has published in a variety of journals including International Journal of Research
in Marketing, Journal of Marketing Research, Journal of Consumer Research, Marketing
Science, and Review of Industrial Organization. For his services, GK has been recognized by
MIT with the Harold Lobdell Award. For his research contributions, GK also has been
recognized by American Marketing Association and INFORMS. He serves on the editorial
boards of several scholarly journals.

Doh-Khul Kim., Ph.D., is Associate Professor of Economics and Finance at North Central
College; prior to that, he was Associate Professor at Mississippi State University. He received his
Ph.D. from the University of Georgia. He has published in the journal International Advances in
Economic Research.

Zakia Mishal, Ph.D., is Professor of Economics at the Department of Economics, faculty of

Business and Economics at Yarmouk University, Jordan. She holds her MA and Ph.D. degrees in
Economic Development and Urban Economics from the University of Illinois at Chicago, USA.
Her research and teaching interests include sources of economic development, international
development, urbanization, and the role of women in the economy.

John J. Phelan, Ph.D., received his B.S. in business and economics, ’65 and MA in economics,
’67, from Indiana University and Ph.D. from The George Washington University, ’77; senior
economist, Federal Trade Commission, 1969-81; Associate Executive Secretary to the Secretary,
U.S. Dept of Health and Human Services; 1981-89 (regulatory policy advisor). While working
for the Secretary of HHS, Dr. Phelan was involved in FDA policy issues and in particular, the
one that resulted in the elimination of prohibitions against the advertising of Rx drugs directly to
consumers. Dr. Phelan currently teaches economics at the University of New Haven with
research interests in the costs and benefits of Rx advertising, especially with respect to life-
saving drugs such as the statin (anti-cholesterol) drug class.

Stuart Rosenberg, Ph.D., is an Associate Professor in the Leon Hess Business School of
Monmouth University in West Long Branch, New Jersey. He formerly was on the faculty of
Dowling College from 2000-2010. He held management positions in the financial services
industry for over twenty years, first at Manufacturers Hanover Trust Company and later at First
Chicago Corporation. He has written both empirical papers and management case studies that
have been published in various academic journals. Dr. Rosenberg earned a B.A. from Marquette

97
Journal of Business & Economic Studies, Vol. 17, No. 2, Fall 2011

University; an M.A. from the University of Wisconsin-Madison; an A.P.C. from New York
University; and an M.B.A. and Ph.D. from Fordham University.

Gim S. Seow, Ph.D., is an Associate Professor of Accounting at the University of Connecticut.

His research interests include accounting standard-setting and securities regulation in
international markets, accounting for financial derivatives, corporate risk management policies,
audit quality and industry expertise, valuation of intangible assets, and so forth. He has published
in several journals, including the Journal of Accounting and Economics, Contemporary
Accounting Research, and Accounting, Organizations and Society.

Joe Z. Shangguan, Ph.D., is an Associate Professor of Accounting at Robert Morris University.

He received his Ph.D. in Accounting from the University of Connecticut. His recent research
interests include intangible assets valuation, goodwill impairment, and mergers and acquisitions.
He has published in journals such as the Journal of Corporate Finance and Review of
Quantitative Finance and Accounting.

Jeungbo Shim, Ph.D., is Assistant Professor of Business Administration at Illinois Wesleyan

University. He received his Ph.D. from Georgia State University. His primary research interests
are mergers and acquisitions, capital structure, diversification, and risk measures. His research
has been published in Journal of Banking and Finance, Journal of Financial Services Research,
and International Journal of Business and Economics.

Michaeline Skiba, Ph.D., is an Associate Professor in the Leon Hess Business School of
Monmouth University in West Long Branch, New Jersey. In the business sector, she held senior
management positions within three Fortune 500 companies, where she developed marketing and
management programs, pharmaceutical marketing strategy (pre-launch), healthcare symposia and
colloquia (for CME and CPE credit), journal supplements, and market research (focus groups
and telephone-based interviews). Dr. Skiba earned a B.S. in education and biological sciences
from Loyola University Chicago; an M.S.I.R. from Loyola University Chicago; an M.Ed. from
Boston College; and an Ed.D. from Columbia University.

98
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.