Pay Referents and Satisfaction with Pay: Does Occupational Proximity Matter?

Abstract

We explore whether employees compare their pay to the pay of others in a similarly prestigious occupation and, if so, whether this comparison has a negative impact on pay satisfaction. Using an experimental vignette methodology, Study 1 found that people are more inclined to compare with others from a similar or identical occupation and that comparison negatively impacts pay satisfaction. This comparison and its negative effect is particularly strong in high‐prestige occupations. Based on survey data, Study 2 also showed that the average pay of others in occupations of similar prestige is negatively correlated with employees’ pay satisfaction. This negative correlation was also stronger in higher‐prestige occupations. Our analysis highlights the importance of occupational prestige as a main factor influencing pay comparison.