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Wage Comparisons in and out of the Firm. Evidence from a Matched Employer-Employee French Database

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  • Olivier Godechot

    (IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris, OSC - Observatoire sociologique du changement - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, MaxPo - Max Planck Sciences Po Center on Coping with Instability in Market Societies - Max Planck Institute for the Study of Societies - Max-Planck-Gesellschaft - IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris)

  • Claudia Senik

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, UP4 - Université Paris-Sorbonne)

Abstract

This paper looks at the association between wage satisfaction and different notions of reference wage, based on a matched employer-employee dataset. It shows that workers' satisfaction depends on otherpeople's income in different ways. Relative income concerns are important, but we also find robust evidence of signal effects. For instance, workers are happier the higher the median wage in their firm, holding their own wage constant. This is true of all employees, whatever their relative position in the firm. This signal effect is stronger for young people and for women. These findings are based on objective measures of earnings as well as subjective declarations about wage satisfaction, awareness of other people's wage and reported income comparisons.

Suggested Citation

  • Olivier Godechot & Claudia Senik, 2013. "Wage Comparisons in and out of the Firm. Evidence from a Matched Employer-Employee French Database," PSE Working Papers halshs-00907268, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00907268
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00907268
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    Cited by:

    1. Prati, Alberto, 2017. "Hedonic recall bias. Why you should not ask people how much they earn," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 78-97.
    2. Goerke, Laszlo & Neugart, Michael, 2017. "Social comparisons in oligopsony," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 196-209.
    3. Stavros A. Drakopoulos, 2020. "Pay Level Comparisons in Job Satisfaction Research and Mainstream Economic Methodology," Journal of Happiness Studies, Springer, vol. 21(3), pages 825-842, March.
    4. Christian Grund & Maike Rubin, 2017. "Social comparisons of wage increases and job satisfaction," Applied Economics, Taylor & Francis Journals, vol. 49(14), pages 1345-1350, March.
    5. 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.
    6. Laszlo Goerke & Michael Neugart, 2017. "Social comparisons in Oligopsony," IAAEG Discussion Papers until 2011 201704, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    7. 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.
    8. Andrew E. Clark, 2017. "Happiness, income and poverty," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(2), pages 145-158, June.
    9. Mohrenweiser, Jens & Pfeifer, Christian, 2019. "Firms' Wage Structures, Workers' Fairness Perceptions, Job Satisfaction and Turnover Intentions: Evidence from Linked Employer-Employee Data," IZA Discussion Papers 12821, Institute of Labor Economics (IZA).
    10. Piper, Alan T., 2015. "Sliding down the U-shape? A dynamic panel investigation of the age-well-being relationship, focusing on young adults," Social Science & Medicine, Elsevier, vol. 143(C), pages 54-61.
    11. Filiz Gülal & Adam Ayaita, 2018. "The Impact of Minimum Wages on Well-Being: Evidence from a Quasi-Experiment in Germany," SOEPpapers on Multidisciplinary Panel Data Research 969, DIW Berlin, The German Socio-Economic Panel (SOEP).
    12. Piper, Alan T., 2014. "Sliding down the U-shape? An investigation of the age-well-being relationship, with a focus on young adults," MPRA Paper 55819, University Library of Munich, Germany.
    13. Sun Youn Lee & Fumio Ohtake, 2018. "How Conscious Are You of Others? Further Evidence on Relative Income and Happiness," ISER Discussion Paper 1022, Institute of Social and Economic Research, Osaka University.

    More about this item

    Keywords

    Income comparisons; Income distribution; Job satisfaction; Wage satisfaction; Signal effect; Matched employer-employee survey data;

    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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