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Job satisfaction and co‐worker pay in Canadian firms

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  • Mohsen Javdani
  • Brian Krauth

Abstract

One reason to be concerned about income inequality is the idea that people care about not only their own absolute income but also their income relative to various reference groups (co‐workers, friends, neighbours, relatives, etc.). We use Canadian linked employer–employee data to estimate the casual effect of co‐worker pay on a worker's reported job and pay satisfaction. Since worker satisfaction can affect the worker's productivity, organizational commitment, turnover, creativity and innovation as well as the firm's productivity and profitability, this is an issue that requires more attention and careful examination. In models that control for a rich set of workplace characteristics, we find that co‐worker pay has a large positive and significant effect on both pay and job satisfaction. In our preferred models with establishment‐level fixed effects, the effect of co‐worker pay on pay satisfaction is half as large and the effect on job satisfaction completely disappears, suggesting that part (all) of what previous studies attribute to the effect of co‐worker pay on worker pay (job) satisfaction is driven by unobserved heterogeneity across firms or establishments. Our results also suggest that the effect of co‐worker pay on worker satisfaction is much stronger for workers who leave their job during the following year. Finally, we find that while co‐worker pay has a positive effect on pay satisfaction among Canadian‐born whites, it has a negative effect among immigrants and Canadian‐born visible minorities. Satisfaction au travail et salaire des collègues dans les entreprises au Canada. L’idée que les gens ne s’intéressent pas uniquement à leurs propres revenus absolus, et qu’ils les évaluent à l’aune de ceux de différents groupes de référence (collègues, amis, voisins, proches, etc.) offre une occasion de s’interroger sur les inégalités salariales. Pour évaluer l’effet informel du salaire des collègues sur la satisfaction déclarée d’un travailleur concernant son travail et sa paye, nous avons utilisé les données canadiennes sur la dynamique employeurs‐employés. Étant donné que la satisfaction d’un travailleur peut avoir une incidence sur sa propre productivité, son engagement organisationnel, le roulement du personnel, la créativité et l’innovation ainsi que sur la productivité et la rentabilité d’une entreprise, cette question requiert davantage d’attention et nécessite un examen approfondi. Dans les modèles tenant compte d’une vaste gamme de caractéristiques liées aux lieux de travail, nous avons découvert que le salaire des collègues génère des effets très positifs et significatifs sur la satisfaction d’un travailleur relativement à son emploi et à son salaire. En revanche, dans nos modèles de référence avec effets fixes au niveau d’une entreprise, l’incidence du salaire des collègues est moitié moindre concernant la satisfaction d’un travailleur relativement à sa paye, et disparaît totalement relativement à sa satisfaction au travail. Cela suggère qu’une partie (ou tout) ce que les études précédentes ont pu attribuer aux effets du salaire des collègues sur la satisfaction d’un travailleur relativement à son emploi ou sa paye résulte d’une hétérogénéité non observée dans les entreprises et les établissements. Nos résultats suggèrent également que les effets du salaire des collègues sur la satisfaction d’un travailleur sont bien plus importants auprès de ceux qui quittent leur emploi l’année suivante. Enfin, tandis que le salaire des collègues génère des effets positifs sur la satisfaction des travailleurs blancs nés au Canada relativement à leur paye, nous avons remarqué que ces effets s’avéraient négatifs pour les immigrants et les membres de minorités visibles nées au Canada.

Suggested Citation

  • Mohsen Javdani & Brian Krauth, 2020. "Job satisfaction and co‐worker pay in Canadian firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 212-248, February.
  • Handle: RePEc:wly:canjec:v:53:y:2020:i:1:p:212-248
    DOI: 10.1111/caje.12422
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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