Job Satisfaction and Co-worker Wages: Status or Signal?

We use matched employer-employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better-paid. This runs counter to substantial existing evidence of income comparisons in subjective well-being. We argue that the difference hinges on the n...

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Bibliographic Details
Published in:The Economic journal (London) 2009-03, Vol.119 (536), p.430-447
Main Authors: Clark, Andrew E, Kristensen, Nicolai, Westergård-Nielsen, Niels
Format: Article
Language:English
Subjects:
Average earnings
Earnings
Economic theory
Economics and Finance
Empirical evidence
Envy
Humanities and Social Sciences
Income
Income inequality
Job performance
Job satisfaction
Labor markets
Labour relations
Signalling
Studies
Survey data
Wage differentials
Wages
Wages & salaries
Well-being
Wellbeing
Work place
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Summary:We use matched employer-employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better-paid. This runs counter to substantial existing evidence of income comparisons in subjective well-being. We argue that the difference hinges on the nature of the reference group. Here we use co-workers. Their earnings not only induce jealousy but also provide a signal about the worker's own future earnings. In our data, this positive future earnings signal outweighs any negative status effect. This phenomenon is stronger for men and in the private sector but weaker for those nearer retirement.
ISSN:0013-0133
1468-0297
DOI:10.1111/j.1468-0297.2008.02236.x