Skip to main content
SpringerLink
Log in

Do Comparison Wages Play a Major Role in Determining Overall Job Satisfaction? Evidence from Australia

  • Research Paper
  • Published:
Journal of Happiness Studies Aims and scope Submit manuscript

Abstract

A vast research literature indicates that comparison wages play a key role in determining job satisfaction. To examine this in the case of Australia, comparison wages are first constructed using two different measures, namely (1) cell average wages by age, gender and education level; and (2) ranked position of an individual’s wages in each cell. Then, using the first six waves of the HILDA Survey dataset, a random effects ordered probit model is utilized to predict overall job satisfaction. The findings of the study show that both own wages and comparison wages have an impact on overall job satisfaction. Comparison wages computed using the ranked position of an individual’s wages within a cell have an equal effect as that of own wages. The study further confirms that the ranked position of an individual’s wages in each cell matters more than cell average wages.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. For more information on how to do this in Stata refer to Jones et al. (2007).

  2. An attempt to predict wage from a Mincer-type equation is made but due to a lack of suitable exclusion restrictions the regression output paints a muddier picture in terms of change of sign and magnitude of non wage variables inserted into a model.

  3. An individual’s utility (satisfaction) from working is nested in the total utility function, \({\text{v}} = {\text{v}}({\text{u}}, \, \mu ),\) where v is overall utility, u is utility from work and μ is utility from other aspects of life (e.g., leisure time, family time).

  4. For more information on the mathematical expression refer to Boyce et al. (2010).

  5. This is known as the incidental parameters problem.

  6. Such a strong assumption that the individual-specific error term is uncorrelated with the explanatory variable may not hold and thus a random effects regression is run with the addition of Mundlak correction (more information on this is written in the following section of the paper).

  7. The number of observations in columns 1 of Table 3 is slightly higher than in the other columns. When computing the cell average income, 11 observations were dropped because they couldn’t be grouped by age, gender and education level.

  8. Such a relationship might be because more qualified workers are more susceptible to have higher expectations that do not always come true. It might also be due to the fact that more qualified workers are more prone to be overqualified, hence less satisfied with their jobs.

  9. A formal test is carried out by computing a Wald statistic for the null hypothesis that the coefficients included as a result of Mundlak correction equal zero and the test result indicates that the null hypothesis cannot be rejected.

References

  • Abbott, D. H., Keverne, E. B., Bercovitch, F. B., Shively, C. A., Mendoza, S. P., Saltzman, W., et al. (2003). Are subordinates always stressed? A comparative analysis of rank differences in cortisol levels among primates. Hormones and Behavior, 43, 67–82.

    Article  Google Scholar 

  • Adams, J. (1965). Inequity in social exchange. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 2, pp. 267–299). New York: Academic Press.

    Google Scholar 

  • Appley, M. H. (Ed.). (1971). Adaptation level theory: A symposium. New York: Academic Press.

    Google Scholar 

  • Blanchflower, D. G., & Oswald, A. J. (2004). Wellbeing over time in Britain and the USA. Journal of Public Economics, 88, 1359–1386.

    Article  Google Scholar 

  • Boyce, C. J., Brown, G. D. A., & Moore, S. (2010). Money and happiness: Rank of income, not income, affects life satisfaction. Psychological Science, 21, 471–475.

    Article  Google Scholar 

  • Brehm, J. W., & Cohen, A. R. (1962). Explorations in cognitive dissonance. New York: Wiley.

    Book  Google Scholar 

  • Brown, M. (2001). Unequal pay, unequal responses? Pay referents and their implications for pay level satisfaction. Journal of Management Studies, 38, 879–896.

    Article  Google Scholar 

  • Brown, G. D. A., Gardner, J., Oswald, A. J., & Qian, J. (2008). Does wage rank affect employees’ well-being? Industrial Relations, 47, 355–389.

    Google Scholar 

  • Caplin, A., & Leahy, J. (2001). Psychological expected utility and anticipatory feelings. Quarterly Journal of Economics, 116, 55–80.

    Article  Google Scholar 

  • Cappelli, P., & Sherer, P. D. (1988). Satisfaction, market wages and labor relations: An airline study. Industrial Relations, 27, 56–73.

    Google Scholar 

  • Card, D., Mas, A., Moretti, E., & Saez, E. (2011). Inequality at work: The effect of peer salaries on job satisfaction. http://emlab.berkeley.edu/~moretti/ucpay.pdf. Accessed 25 June 2011.

  • Clark, A. E. (1997). Job satisfaction and gender: Why are women so happy at work? Labour Economics, 4, 341–372.

    Article  Google Scholar 

  • Clark, A. E. (2011). Happiness, habits and high rank: Comparisons in economic and social life. http://iza.org/dp5966.pdf. Accessed 02 February 2012.

  • Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature, 46, 95–144.

    Article  Google Scholar 

  • Clark, A. E., Kristensen, N., & Westergard-Nielsen, N. (2009). Job satisfaction and co- worker wages: Status or signal?. Economic Journal, 119, 430–447.

    Article  Google Scholar 

  • Clark, A. E., Masclet, D., & Villeval, M. C. (2010). Effort and comparison income: Experimental and survey evidence. Industrial and Labor Relations Review, 63, 407–426.

    Google Scholar 

  • Clark, A. E., & Oswald, A. J. (1996). Satisfaction and comparison income. Journal of Public Economics, 61, 359–381.

    Article  Google Scholar 

  • Cohen, S. L., Scott, M. S., Rabin, B. H., & Eugene, K. J. (1997). Chronic social stress, social status, and susceptibility to upper respiratory infections in nonhuman primates. Psychosomatic Medicine, 59, 213–221.

    Article  Google Scholar 

  • Corcoran, K., Crusius, J., & Mussweiler, T. (2011). Social comparison: Motives, standards, and mechanisms. In D. Chadee (Ed.), Theories in social psychology (pp. 119–139). Oxford, UK: Wiley-Blackwell.

    Google Scholar 

  • Crosby, F. (1976). A model of egoistical relative deprivation. Psychological Review, 83, 86–113.

    Article  Google Scholar 

  • Crosby, F. (1984). Relative deprivation in organizational settings. In B. M. Staw & L. L. Cummings (Eds.), Research in organizational behavior (pp. 51–93). Greenwich, CT: JAI Press.

    Google Scholar 

  • de la Garza, A., Mastrobuoni, G., Sannabe, A., & Yamanda, K. (2010). The relative utility hypothesis with and without self-reported reference wages, ISER Discussion Paper No. 798.

  • Deaton, A. (2003). Health, inequality and economic development. Journal of Economic Literature, 41, 113–158.

    Article  Google Scholar 

  • Drakopoulos, S. A. (2008). The concept of comparison income: An historical perspective. http://mpra.ub.uni-muenchen.de/8713/1/MPRA_paper_8713.pdf. Accessed 15 June 2012.

  • Duesnberry, J. S. (1949). Income, saving and the theory of consumer behavior. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Easterlin, R. A. (1973). Does money buy happiness? The Public Interest, 30, 3–10.

    Google Scholar 

  • Falk, A., & Knell, M. (2004). Choosing the Joneses: On the endogeneity of reference groups. Scandinavian Journal of Economics, 106, 417–435.

    Article  Google Scholar 

  • Ferrer-i-Carbonell, A. (2005). Income and well-being: An empirical analysis of the comparison income effect. Journal of Public Economics, 89, 997–1019.

    Article  Google Scholar 

  • Festinger, L. (1954). A theory of social comparison processes. Human Relations, 7, 117–140.

    Article  Google Scholar 

  • Festinger, L. (1957). A theory of cognitive dissonance. New York: Row, Peterson.

    Google Scholar 

  • Friedman, M. (1957). A theory of the consumption function. Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Gao, W., & Smyth, R. (2010). Job satisfaction and relative income in economic transition: Status or signal? The case of urban China. China Economic Review, 21, 442–455.

    Article  Google Scholar 

  • Hagerty, M. R. (2000). Social comparisons of income in one’s community: Evidence from national surveys of income and happiness. Journal of Personality and Social Psychology, 78, 764–771.

    Article  Google Scholar 

  • Hamermesh, D. S. (1977). Economic aspects of job satisfaction. In O. C. Ashenfelter & W. E. Oates (Eds.), Essays in labor market analysis (pp. 53–72). New York: Wiley.

    Google Scholar 

  • Hardin, J. W., & Hilbe, J. M. (2007). Generalized linear models and extensions. College Station, Tex.: Stata Press.

    Google Scholar 

  • Helson, H. (1964). Adaptation-theory: An experimental and systematic approach to behavior. New York: Harper.

    Google Scholar 

  • Hirschman, A. O., & Rothschild, M. (1973). The changing tolerance for income inequality in the course of economic development. Quarterly Journal of Economics, 87, 544–566.

    Article  Google Scholar 

  • Jones, A. M., Rice, N., Bago d’Uva, T., & Balia, S. (2007). Applied health economics. Milton Park, Abingdon, OX; New York, NY: Routledge.

    Google Scholar 

  • Kockesen, L. (2008). Relative income hypothesis. In W. A. Darity (Ed.), International encyclopedia of the social sciences (2nd ed., Vol. 9, pp. 153–154). Detroit: Macmillan Reference USA.

    Google Scholar 

  • Lévy-Garboua, L., & Montmarquette, C. (2001). Satisfaction judgments and utility analysis. Mimeo: University Paris I.

    Google Scholar 

  • Lévy-Garboua, L., & Montmarquette, C. (2004). Reported job satisfaction: What does it mean? The Journal of Socio-Economics, 33, 135–151.

    Article  Google Scholar 

  • Long, A. (2005). Happily ever after? A study of job satisfaction in Australia. The Economic Record, 81, 303–321.

    Article  Google Scholar 

  • Luttmer, E. F. P. (2005). Neighbors as negatives: Relative earnings and well-Being. The Quarterly Journal of Economics, 120, 963–1002.

    Google Scholar 

  • Martin, J. (1981). Relative deprivation: A theory of distributive injustice or an era of shrinking resources. In L. L. Cummings & B. M. Staw (Eds.), Research in organizational behaviour (Vol. 3, pp. 53–107). Greenwich, CT: JAI Press.

    Google Scholar 

  • Marx, K. (1849). Wage-labour and capital. http://eserver.org/marx/1849-wage.labor.capital/6-labor.and.capital.txt. Accessed 10 May 2012.

  • McBride, M. (2001). Relative income effect on subjective wellbeing in the cross-section. Journal of Economic Behavior & Organization, 45, 251–278.

    Article  Google Scholar 

  • Merton, R. K., & Kitt, A. S. (1950). Contributions to the theory of reference group behavior. In R. K. Merton & P. F. Lazarsfeld (Eds.), Continuities in social research, studies in the scope and method of "The American Soldier" (pp. 40–105). Glencoe, Ill.: The Free Press.

    Google Scholar 

  • Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In Kenneth K. Kurihara (Ed.), Post-Keynesian economics (pp. 388–436). New Brunswick, NJ: Rutgers University Press.

    Google Scholar 

  • Mundlak, Y. (1978). On the pooling of time series and cross section data. Econometrics, 46, 69–85.

    Article  Google Scholar 

  • Powdthavee, N. (2009). How important is rank to individual perception of economic standing? A within-community analysis. Journal of Economic Inequality, 7, 225–248.

    Article  Google Scholar 

  • Ravallion, M., & Lokshin, M. (2001). Identifying welfare effects from subjective questions. Economica, 68, 335–357.

    Article  Google Scholar 

  • Sapolsky, R. M. (2004). Social status and health in humans and other animals. Annual Review of Anthropology, 33, 393–418.

    Article  Google Scholar 

  • Senik, C. (2004). When information dominates comparison: Learning from Russian subjective panel data. Journal of Public Economics, 88, 2099–2133.

    Article  Google Scholar 

  • Senik, C. (2008). Ambition and jealousy: Income interactions in the ‘Old’ Europe versus the ‘New’ Europe and the United States. Economica, 75, 495–513.

    Article  Google Scholar 

  • Shively, C. A., Laber-Laird, K., & Anton, R. F. (1997). Behavior and physiology of social stress and depression in female cynomolgus monkeys. Biological Psychiatry, 41, 871–882.

    Article  Google Scholar 

  • Sloane, Peter J., & Williams, H. (2000). Job satisfaction, comparison earnings, and gender. Labor, 14, 473–502.

    Google Scholar 

  • Smith, R. H., Diener, E., & Wedell, D. H. (1989). Intrapersonal and social-comparison determinants of happiness: A range-frequency analysis. Journal of Personality and Social Psychology, 56, 317–325.

    Article  Google Scholar 

  • Stutzer, A. (2004). The role of aspirations and individual happiness. Journal of Economic Behavior & Organization, 54, 89–109.

    Article  Google Scholar 

  • Veblen, T. (1899). The theory of the leisure class. New York: Macmillan.

    Google Scholar 

  • Verbeek, M., & Nijman, T. E. (1992). Testing for selectivity bias in panel data models. International Economic Review, 33, 681–703.

    Article  Google Scholar 

  • Walster, E., Traupmann, J., & Walster, G. W. (1978). Equity and extramarital sexuality. Archives of Sexual Behavior, 7, 127–142.

    Article  Google Scholar 

  • Wilkinson, R. G. (1996). Unhealthy societies: The affliction of inequality. London: Routledge.

    Book  Google Scholar 

  • Zizzo, D. J., & Oswald, A. J. (2001). Are people willing to pay to reduce others’ incomes? Annales d’Economie et de Statistique, 63–64, 39–65.

    Google Scholar 

Download references

Acknowledgments

I would like to thank the Melbourne Institute and the Department of Family and Community Services for providing me with the HILDA dataset. The views expressed in this article do not necessarily reflect those of the Melbourne Institute nor the Department of Family and Community Services. All errors and omissions remain my own.

Author information

Authors and Affiliations

  1. School of Economics, The University of Queensland, Room 653, Colin Clark Building (#39), St Lucia, Brisbane, Australia

    Temesgen Kifle

Authors
  1. Temesgen Kifle
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Temesgen Kifle.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kifle, T. Do Comparison Wages Play a Major Role in Determining Overall Job Satisfaction? Evidence from Australia. J Happiness Stud 15, 613–638 (2014). https://doi.org/10.1007/s10902-013-9439-6

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10902-013-9439-6

Keywords

Search

Navigation