Does wage rank affect your well-being?

Posted by Ricki Sharpe on September 3, 2008  
Filed Under Work Behaviour

Do you think you are being paid enough? Your answer to that question depends not just on how much you get, but how your pay compares with that of your colleagues. According to a new study, employees do not care solely about their absolute level of pay, but how their pay ranks with those around them.

A new study in the journal Industrial Relations reveals that employee well-being is dependent upon the rank of an individual’s wage within a comparison group, as opposed to the individual’s absolute pay.

Gordon D.A. Brown, Jonathan Gardner, Andrew J. Oswald, and Jing Qian asked undergraduates to rate how satisfied they would be with wages they might be offered for their first job after college. Subjects expressed feelings about each potential wage in the context of a set of other wages. Researchers also analyzed data from 16,000 employees who reported on workplace satisfaction.

Employees did not care solely about their absolute level of pay. Workers were more concerned with their income relative to the salary levels around them in their workplace. Individuals were not just influenced by relative income but by the rank-ordered position of his or her wage within a comparison set.

“Our study shows how ordinal rank has a statistically significant effect upon well-being” the authors conclude. “Results show that human well-being depends in a particular way upon comparisons with others.”

Reference

Brown, G. D. A, Gardner, J., Oswald, A. J. & Qian, J. (2008). Does wage rank affect employees’ well-being? Industrial Relations: A Journal of Economy and Society, 47, 355 - 389.


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