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The Impact of within and between Occupational Inequalities on People's Justice Perceptions towards Their Own Earnings

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  • Carsten Sauer
  • Peter Valet
  • Stefan Liebig
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    Abstract

    This paper investigates justice perceptions of employees towards their own earnings. Earnings are decomposed into three components: (1) In returns based on human capital endowments, (2) in returns based on individual residual differences and (3) in returns based on differences between occupations. The legitimacy of these earnings components is measured via the justice assessments of employees. Based on theoretical models from justice research and class theory it is hypothesized that earnings inequality resulting from human capital factors is evaluated as just, whereas residual inequality and occupational inequality are perceived as unjust. The hypotheses are tested by using data from a German longitudinal panel study (SOEP) of the years 2005 to 2011. These data allow studying changes of individual earnings and justice evaluations in a household panel over the time span of six years (with four biennial measurement points). The findings support our hypotheses indicating that losses or gains in earnings which are due to changes in human capital endowments do not affect justice perceptions of own earnings. Losses or gains stemming from changes of a person's earnings position within the occupational group or the position of a person's occupational group within the earnings hierarchy of a society, however, affect justice perceptions remarkably. Thus, we can show that justice evaluations of own earnings do not solely depend on compensation for individual investments but also on residual differences in earnings within and between occupational groups.

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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.424985.de/diw_sp0567.pdf
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    Bibliographic Info

    Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 567.

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    Length: 19 p.
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:diw:diwsop:diw_sp567

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    Related research

    Keywords: Earnings inequality; fairness of earnings; decomposition of justice evaluations; group identification; panel regression;

    This paper has been announced in the following NEP Reports:

    References

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    1. Armin Falk & Ingo Menrath & Pablo Emilio Verde & Johannes Siegrist, 2011. "Cardiovascular Consequences of Unfair Pay," SOEPpapers on Multidisciplinary Panel Data Research 380, DIW Berlin, The German Socio-Economic Panel (SOEP).
    2. George J. Stigler, 1950. "The Development of Utility Theory. I," Journal of Political Economy, University of Chicago Press, vol. 58, pages 307.
    3. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
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    6. Schupp, Jürgen, 2009. "25 Jahre Sozio-oekonomisches Panel - ein Infrastrukturprojekt der empirischen Sozial- und Wirtschaftsforschung in Deutschland," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 350-357.
    7. Svend Juul, 2003. "Lean mainstream schemes for Stata 8 graphics," Stata Journal, StataCorp LP, vol. 3(3), pages 295-301, September.
    8. Jasso, Guillermina, 2007. "Studying Justice: Measurement, Estimation, and Analysis of the Actual Reward and the Just Reward," IZA Discussion Papers 2592, Institute for the Study of Labor (IZA).
    9. Stefan Liebig & Carsten Sauer & Jürgen Schupp, 2009. "The Justice of Earnings in Dual-Earner Households," SOEPpapers on Multidisciplinary Panel Data Research 216, DIW Berlin, The German Socio-Economic Panel (SOEP).
    10. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
    11. Acemoglu, Daron, 2002. "Directed Technical Change," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 781-809, October.
    12. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
    13. Tepper, Bennett J., 2001. "Health Consequences of Organizational Injustice: Tests of Main and Interactive Effects," Organizational Behavior and Human Decision Processes, Elsevier, vol. 86(2), pages 197-215, November.
    14. Tyler, Tom R. & Smith, Heather J., 1995. "Social Justice and Social Movements," Institute for Research on Labor and Employment, Working Paper Series qt54d3j035, Institute of Industrial Relations, UC Berkeley.
    15. Ben Jann, 2005. "Making regression tables from stored estimates," Stata Journal, StataCorp LP, vol. 5(3), pages 288-308, September.
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