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Relative Income and Pay Satisfaction: Further Evidence on the Role of the Reference Group

Author

Listed:
  • Laetitia Hauret

    (LISER - Luxembourg Institute of Socio-Economic Research)

  • Donald R. Williams

    (LISER - Luxembourg Institute of Socio-Economic Research
    Kent State University)

Abstract

Social comparison is an important issue in the context of subjective well-being. Subjective well-being, including satisfaction with pay, is not only affected by individual salary but also by the salaries of members of a reference group. This paper studies the relationship between relative wage and pay satisfaction allowing the choice of reference group to vary across individuals. The paper utilizes a survey on working conditions and quality of working life that contains questions regarding the individual’s choice of reference group for income comparisons. The results indicate that even after controlling for reference group choice, both absolute and relative pay are significantly related to satisfaction with pay. Allowing the reference group to vary improves the overall performance of the model, however. We also present evidence that questions regarding relative pay are good predictors of satisfaction with pay.

Suggested Citation

  • Laetitia Hauret & Donald R. Williams, 2019. "Relative Income and Pay Satisfaction: Further Evidence on the Role of the Reference Group," Journal of Happiness Studies, Springer, vol. 20(1), pages 307-329, January.
    • Handle: RePEc:spr:jhappi:v:20:y:2019:i:1:d:10.1007_s10902-017-9950-2
    DOI: 10.1007/s10902-017-9950-2
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    References listed on IDEAS

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    2. Peter Valet, 2023. "Perceptions of Pay Satisfaction and Pay Justice: Two Sides of the Same Coin?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 166(1), pages 157-173, February.
    3. Drakopoulos, Stavros A., 2023. "The Economics of Wellbeing and Psychology: An Historical and Methodological Viewpoint," MPRA Paper 117891, University Library of Munich, Germany.
    4. Martin, Thomas & Sgroi, Daniel, 2022. "Satisfaction and the potentially misleading power of counter-factual reasoning : a field study set before, during and after the COVID-19 lockdown," The Warwick Economics Research Paper Series (TWERPS) 1443, University of Warwick, Department of Economics.

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