Does Wage Rank Affect Employees' Wellbeing?

By Gordon D. A. Brown, Jonathan Gardner, Andrew J. Oswald, Jing Qian. Social Science Research Network, 2008

387 citations recorded by the source corpus.

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.

Subfields: General Decision Sciences, Safety Research, Social Psychology

View Paper: https://www.semanticscholar.org/paper/a3e5d56627e2515a0875f72b24d3116749abd69c

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In General Decision Sciences

1. Yogita Shamdasani
2. Supreet Kaur
3. Emily Breza

In Safety Research

1. Yogita Shamdasani
2. Andy Charlwood
3. R. Murphy
4. Supreet Kaur
5. Emily Breza
6. Felix Weinhardt

In Social Psychology

1. Andy Charlwood
2. R. Murphy
3. David A Spencer
4. Felix Weinhardt
5. D. Wheatley
6. C. Bickerton

Citations in the corpus

• Not all that it might seem: why job satisfaction is worth studying despite it being a poor summary measure of job quality (2012, background): “Over the last two decades, economists have joined psychologists in studying subjective well-being at work (e.g. Clark, 1996, 1997; Clark et al., 1996; Green, 2006, 2010; Booth and van Ours, 2008; Brown et al., 2008).”
• “Last-Place Aversion”: Evidence and Redistributive Implications (2014, neutral): “Or, individuals may try to maximize their position within the income range (Brown et al. 2008) or their position in the range relative to the last-place person, yi ylast Range (Rablen 2008).”
• Job Satisfaction and Co-worker Wages: Status or Signal? (2009, neutral): “Some labour-market examples are Capelli and Sherer (1988), Pfeffer and Langton (1993), Clark and Oswald (1996), Law and Wong (1998), Bygren (2004), Ferrer-iCarbonell (2005), and Brown et al.”
• The Morale Effects of Pay Inequality (2016, positive): “First, Card et al. (2012) document that workers report higher job dissatisfaction on surveys when they find out that they are paid less than their co-workers. Second, Cohn et al. (2012) show that relative pay cuts matter more than absolute pay cuts for effort over a six-hour period.”
• Performance appraisals and job satisfaction (2017, neutral): “All controls are frequently used in regressions with job satisfaction as dependent variable (Brown et al., 2008; Green & Heywood, 2008).”
• Happiness Adaptation to Income and to Status in an Individual Panel (2010, neutral): “…on whether the respondent is married, divorced, separated or widowed), employment state (a set of dummies depending on whether the respondent is in the military, self-employed or a public servant) and education (a set of dummies measuring high school 7 Most work on the area studies betting markets.”
• Top of the Class: The Importance of Ordinal Rank (2018, background): “Recent papers have shown that an individual’s rank impacts their well-being and job satisfaction, conditional on their cardinal relative position (Brown et al., 2008; Card et al., 2012).”