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Wage comparisons in and out of the firm

Author

Listed:
  • Olivier Godechot

    (Sciences Po - Sciences Po, OSC - Observatoire sociologique du changement (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Claudia Senik

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UP4 - Université Paris-Sorbonne)

Abstract

This paper looks at the association between wage satisfaction and other people's pay, based on a matched employer–employee dataset. Three notions of reference wage appear to be being of particular importance: (i) the median wage level in one's firm, (ii) the level of wage of similar workers in the region, and (iii) the top 1% wage in one's firm. The first one triggers a signal effect, whereby all employees – especially young ones – whatever their relative position in the firm, are happier the higher the median wage in their firm, holding their own wage constant. The second and the third ones are sources of relative deprivation, i.e. workers' satisfaction decreases with the gap between their own salary and these reference categories. These findings are based on objective measures of earnings as well as subjective declarations about wage satisfaction, awareness of other people's pay and reported income comparisons.

Suggested Citation

  • Olivier Godechot & Claudia Senik, 2015. "Wage comparisons in and out of the firm," PSE-Ecole d'économie de Paris (Postprint) halshs-01314331, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01314331
    DOI: 10.1016/j.jebo.2015.07.003
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01314331
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    Cited by:

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    2. Goerke, Laszlo & Neugart, Michael, 2017. "Social comparisons in oligopsony," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 196-209.
    3. Stavros A. Drakopoulos, 2020. "Pay Level Comparisons in Job Satisfaction Research and Mainstream Economic Methodology," Journal of Happiness Studies, Springer, vol. 21(3), pages 825-842, March.
    4. Fumagalli, Elena & Fumagalli, Laura, 2022. "Subjective well-being and the gender composition of the reference group: Evidence from a survey experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 196-219.
    5. Laetitia Hauret & Donald R. Williams, 2019. "Relative Income and Pay Satisfaction: Further Evidence on the Role of the Reference Group," Journal of Happiness Studies, Springer, vol. 20(1), pages 307-329, January.
    6. Andrew E. Clark, 2017. "Happiness, income and poverty," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(2), pages 145-158, June.
    7. Mohrenweiser, Jens & Pfeifer, Christian, 2019. "Firms' Wage Structures, Workers' Fairness Perceptions, Job Satisfaction and Turnover Intentions: Evidence from Linked Employer-Employee Data," IZA Discussion Papers 12821, Institute of Labor Economics (IZA).
    8. Cardella, Eric & Roomets, Alex, 2022. "Pay distribution preferences and productivity effects: An experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    9. Filiz Gülal & Adam Ayaita, 2020. "The Impact of Minimum Wages on Well-Being: Evidence from a Quasi-experiment in Germany," Journal of Happiness Studies, Springer, vol. 21(7), pages 2669-2692, October.
    10. Dubnovitskaya, Anastasia, 2021. "Who is satisfied with their pay? Evidence from the Russian Longitudinal Monitoring Survey," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 49-69.
    11. Andrew E. Clark & Claudia Senik & Katsunori Yamada, 2022. "The Joneses in Japan: income comparisons and financial satisfaction," The Japanese Economic Review, Springer, vol. 73(2), pages 351-372, April.
    12. Sourav Sinha, 2022. "US Salary History Bans -- Strategic Disclosure by Job Applicants and the Gender Pay Gap," Papers 2202.03602, arXiv.org.
    13. Sun Youn Lee & Fumio Ohtake, 2021. "How Conscious Are You of Others? Further Evidence on Relative Income and Happiness," Journal of Happiness Studies, Springer, vol. 22(8), pages 3321-3356, December.
    14. Christian Grund & Maike Rubin, 2017. "Social comparisons of wage increases and job satisfaction," Applied Economics, Taylor & Francis Journals, vol. 49(14), pages 1345-1350, March.
    15. Noy, Shakked & Sin, Isabelle, 2021. "The effects of neighbourhood and workplace income comparisons on subjective wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 918-945.
    16. Mohsen Javdani & Brian Krauth, 2020. "Job satisfaction and co‐worker pay in Canadian firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 212-248, February.
    17. Roth, Paula, 2020. "Inequality, Relative Deprivation and Financial Distress: Evidence from Swedish Register Data," Working Paper Series 1374, Research Institute of Industrial Economics.
    18. Wunder, Christoph & Zeydanli, Tugba, 2021. "The early costs of plant closures: Evidence on lead effects on workers’ subjective and objective outcomes," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 489-505.

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    More about this item

    Keywords

    Matched employer–employee survey data; Income comparisons; Distribution; Job satisfaction; Wage satisfaction; Signal effect; Matched employer; Employee survey data; Sociologie; Comparaison de revenus; Emploi;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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