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Within public administration, concerns about performance pay’s effectiveness have tended to focus on how institutional constraints and public sector employees’ unique dispositional qualities limit the potential efficacy of monetary incentives. We suggest that an important, previously overlooked pitfall of public sector performance pay is that it can generate a “paradox of meritocracy” by interacting with results-based organizational cultures in such a way that it produces race- and sex-based inequality. Contra popular notions that meritocratic systems reward individuals exclusively for their performance, we contend that meritocratic systems can instead exacerbate inequality. The mechanism that underlies this “paradox of meritocracy” is system justification—a social psychological phenomenon in which a social system’s participants are predisposed to justify and accept between-person differences in status and its material entailments as legitimate. We combine micro-level federal personnel data on merit pay awards with survey-based measures of agency culture to test our argument.
