Abstract
This study investigates the relationship between intra-firm wage dispersion and employee performance within unionized enterprises in Turkey using a multilevel analytical framework. Drawing on the competing theoretical paradigms of tournament theory and the fair wage-effort hypothesis, we examine how horizontal and vertical wage disparities influence both task performance and organizational citizenship behaviors in environments characterized by collective bargaining. Using hierarchical linear modeling (HLM) on a cross-sectional dataset comprising 1,840 shop-floor and administrative employees nested within 82 unionized manufacturing and service firms across Marmara and Central Anatolia, the findings reveal a curvilinear (inverted U-shaped) association between firm-level wage dispersion and individual-level performance. Moderate wage dispersion enhances incentive intensity without eroding collective morale; however, excessive wage disparities significantly undermine performance, exacerbated by the presence of a strong union climate that values egalitarianism. Furthermore, procedural justice perceptions regarding collective bargaining outcomes moderate this relationship, mitigating the adverse effects of wide wage differentials. The findings provide critical insights for compensation managers and trade union representatives operating within emerging market industrial relations systems, underscoring the necessity of balancing performance incentives with distributive cohesion.
