Top

Journal of Happiness Studies

Published in:

11-12-2017 | Research Paper

Relative Income and Pay Satisfaction: Further Evidence on the Role of the Reference Group

Authors: Laetitia Hauret, Donald R. Williams

Published in: Journal of Happiness Studies | Issue 1/2019

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

Social comparison is an important issue in the context of subjective well-being. Subjective well-being, including satisfaction with pay, is not only affected by individual salary but also by the salaries of members of a reference group. This paper studies the relationship between relative wage and pay satisfaction allowing the choice of reference group to vary across individuals. The paper utilizes a survey on working conditions and quality of working life that contains questions regarding the individual’s choice of reference group for income comparisons. The results indicate that even after controlling for reference group choice, both absolute and relative pay are significantly related to satisfaction with pay. Allowing the reference group to vary improves the overall performance of the model, however. We also present evidence that questions regarding relative pay are good predictors of satisfaction with pay.

previous article Longitudinal Effects of Examination Stress on Psychological Well-Being and a Possible Mediating Role of Self-Esteem in Chinese High School Students

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Available only for authorised users

Indeed, Luxembourgish natives make up less than one third of the labor force.

The survey, “Working Conditions and the Quality of Working Life,” was conducted under a contract with the Luxembourg Ministry of Social Security.

Sampled workers received a letter at their home address inviting them to take part in the survey.

Let P_i,j be the probability of individual “i” choosing reference group “j” and W_j be the average wage in reference group j. Then the predicted wage for individual i is the sum of P_i,jW_j over all groups j.

To proxy Y* for the “relatives/friends” group, we compute, through DADS files, the average salary of French employees in the area of residence of French cross-border workers. Because the salary in Luxembourg is, on average, higher than the salary in France, Y/Y* is always higher than one. For example, on average, in 2013, the gross annual remuneration of full-time employees in the industrial and service sectors was 55,393 euros in Luxembourg and 31,151 euros in Lorraine (region where French cross-border workers live) (http://www.grande-region.lu/portal/donnees/revenus-et-prix/revenus/gains-annuels-moyens-bruts-des-travailleurs-a-temps-plein-par-sexe-et-branche).

Note that the average relative income value for the “don’t know” respondents lies between the values for the “disagree” and “agree” respondents, consistent with the other comparative results.

Calculation of the adjusted R-squared yields the same conclusion.

Coefficients for the variables used in the reference group equations are available from the authors upon request.

Brown, S., Gray, D., & Roberts, J. (2015). The relative income hypothesis: A comparison of methods. Economics Letters,130, 47–50.CrossRef

Bygren, M. (2004). Pay reference standards and pay satisfaction: What do workers evaluate their pay against. Social Science Research,33(2), 206–224.CrossRef

Clark, A. E., Kristensen, N., & Westergard-Nielsen, N. (2009). Job satisfaction and co-worker wages: Status or signal? The Economic Journal,119(536), 430–447.CrossRef

Clark, A. E., & Oswald, A. J. (1996). Satisfaction and comparison income. Journal of Public Economics,61(3), 359–381.CrossRef

Clark, A. E., & Senik, C. (2010). Who compares to whom? The anatomy of income comparisons in Europe. The Economic Journal,120(544), 573–594.CrossRef

Clark, A. E., Senik, C., & Yamada, K. (2013). The Joneses in Japan: Income comparisons and financial satisfaction. ISER Discussion paper no 866.

De la Garza, A., Mastrobuoni, G., Sannabe, A. & Katsunori, Y. (2010). The relative utility hypothesis with and without self-reported reference wages (Vol. 159). Carlo Alberto Working Papers.

Delhey, J., & Kohler, U. (2006). From nationally bounded to pan-European inequalities? On the importance of foreign countries as reference groups. European Sociological Review,22(2), 125–140.CrossRef

Diener, E., & Fujita, F. (1997). Social comparison and subjective well-being. In B. P. Buunk, R. Gibbons, & A. Buunk (Eds.), Health, coping and well-being (pp. 329–358). Mahwah, NJ: Erlbaum.

Easterlin, R. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramowitz (pp. 89–125). New-York: Academic Press.

Falk, A. & Knell, M. (2000). Choosing the Joneses: On the endogeneity of reference groups (Vol. 53). Institute for Empirical Research in Economics, University of Zurich, Working Paper Series.

Festinger, L. (1954). A theory of social comparison processes. Human Relations,7, 117–140.CrossRef

Godechot, O., & Senik, C. (2015). Wage comparisons in and out of the firm. Evidence from a matched employer–employee French database. Journal of Economic Behavior & Organization,117(September), 395–410.CrossRef

Groot, W., & Maassen Van den Brink, H. (1999). Overpayment and earnings satisfaction: An application of an ordered response Tobit Model. Applied Economics Letters,6, 235–238.CrossRef

Hirschman, A., & Rothschild, M. (1973). The changing tolerance for income inequality in the course of economic development. Quarterly Journal of Economics,87(4), 544–566.CrossRef

Loscocco, K. A., & Spitze, G. (1991). The organizational context of women’s and men’s pay satisfaction. Social Science Quarterly,72(1), 3–19.

Luttmer, E. F. P. (2005). Neighbors as negatives: Relative earnings and well-being. The Quarterly Journal of Economics,120(3), 963–1002.

Mayraz, G., Wagner, G.G. & Schupp, J. (2009). Life satisfaction and relative income: Perceptions and evidence (Vol. 4390). IZA Discussion Paper.

McCullagh, P. (1980). Regression models for ordinal data (with discussion). Journal of the Royal Statistical Society: Series B (Methodological),42(2), 109–142.

Montero, R., & Vasquez, D. (2015). Job satisfaction and reference wages: Evidence for a developing country. Journal of Happiness Studies,16(6), 1493–1507.CrossRef

Nguyen, A.N., Taylor, J. & Bradley, S. (2003). Job autonomy and job satisfaction: New evidence. Working paper Department of Economics Management School Lancaster University.

Senik, C. (2008). Ambition and jealousy: Income interactions in the ‘old’ Europe versus the ‘new’ Europe and the United States. Economica,75(299), 495–513.CrossRef

Tansel, A., & Gazioglu, S. (2012). Management–employee relations, firm size and job satisfaction. ERC Working Papers in Economics 12/11.

Williams, M. L., McDaniel, M. A., & Nguyen, N. T. (2006). A meta-analysis of the antecedents and consequences of pay level satisfaction. Journal of Applied Psychology,91(2), 392–413.CrossRef

Title: Relative Income and Pay Satisfaction: Further Evidence on the Role of the Reference Group
Authors: Laetitia Hauret
Donald R. Williams
Publication date: 11-12-2017
Publisher: Springer Netherlands
Published in: Journal of Happiness Studies / Issue 1/2019
Print ISSN: 1389-4978
Electronic ISSN: 1573-7780
DOI: https://doi.org/10.1007/s10902-017-9950-2

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 1/2019

Well-Being and Everyday Ethical Consumption

Longitudinal Effects of Examination Stress on Psychological Well-Being and a Possible Mediating Role of Self-Esteem in Chinese High School Students

Satisfaction with Life, Big-Five Personality Traits and Posttraumatic Growth Among People Living with HIV

How Does Life Satisfaction Change During the Transition from School to Work? A Study of Ninth and Tenth-Grade School-Leavers in Germany

Suicide in Happy Places: Is There Really a Paradox?

Relative Pay, Rank and Happiness: A Comparison Between Genders and Part- and Full-Time Employees