Does Wage Rank Affect Employees' Wellbeing?
55 Pages Posted: 8 Mar 2005
Date Written: March 2005
Abstract
What makes workers happy? Here we argue that pure "rank" matters. It is currently believed that wellbeing is determined partly by an individual's absolute wage (say, 30,000 dollars a year) and partly by the individual's relative wage (say, 30,000 dollars compared to an average in the company or neighborhood of 25,000 dollars). Our evidence shows that this is inadequate. The paper demonstrates that range-frequency theory - a model developed independently within psychology and unknown to most economists - predicts that wellbeing is gained partly from the individual's ranked position of a wage within a comparison set (say, whether the individual is number 4 or 14 in the wage hierarchy of the company). We report an experimental study and an analysis of a survey of 16,000 employees' wage satisfaction ratings. We find evidence of rank-dependence in workers' pay satisfaction.
Keywords: job satisfaction, wages, rank, wellbeing
JEL Classification: J28, J30
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles
By Andrew Clark, Paul Frijters, ...
-
Does Marriage Make People Happy, or Do Happy People Get Married?
By Alois Stutzer and Bruno S. Frey
-
Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges
-
Happiness Adaptation to Income and to Status in an Individual Panel
By Rafael Di Tella, John P. Haisken-denew, ...
-
Happiness Adaptation to Income and to Status in an Individual Panel
By Rafael Di Tella, John De New, ...
-
Do Divorcing Couples Become Happier by Breaking Up?
By Jonathan Gardner and Andrew J. Oswald
-
Heterogeneity in Reported Well-Being: Evidence from Twelve European Countries
By Andrew Clark, Fabrice Etile, ...