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I Can't Get No Satisfaction: The Power of Perceived Differences in Employee Retention and Turnover

Listed author(s):
  • Gevrek, Deniz

    ()

    (Texas A&M University Corpus Christi)

  • Spencer, Marilyn

    ()

    (Texas A&M University Corpus Christi)

  • Hudgins, David

    ()

    (Texas A&M University Corpus Christi)

  • Chambers, Valrie

    ()

    (Stetson University)

Registered author(s):

    This study explores the role of salary raises and the perception of employees of these salary raises on employees' intended retention and turnover. By using a unique survey data set from an American university, this study investigates a novel hypothesis that faculty perceptions of salary raises, relative to their perceptions of other faculty members' assessments of the raises, influences their labor supply. Using both Ordered Probit and OLS modelling frameworks, we focus on the impact of salary raises and the relative perception of these raises on intended labor supply behavior. We explore a hypothesis that a mismatch between one's ranking of the salary raise and the perception of others' rankings causes dissatisfaction. Our results provide evidence that salary raises themselves are effective monetary tools to reduce turnover; however, our results also suggest that relative deprivation as a comparison of one's own perceptions of a salary raise with others affects employee retention. We find that employees who have less favorable perceptions of salary adjustments, compared to what they believe their colleagues think, are more likely to seek another employer, holding their own perception of raises constant. Conversely, more favorable views of salary raises, compared to how faculty members think other's perceived the salary raises, does not have a statistically significant impact on retention. Our results indicate that monetary rewards in the form of salary raises do impact employee retention; however, perception of fairness of these salary raises is also as important as the actual raises. Given the high cost of job turnover, these findings suggest that employers would benefit from devoting resources toward ensuring that salary- and raise-determining procedures are generally perceived by the vast majority of employees as being fair. This is the first study that explores the employee satisfaction with salary raises relative to perceptions of other employees' satisfaction with salary raises, and intended labor supply in an American university.

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    File URL: http://ftp.iza.org/dp10577.pdf
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    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10577.

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    Length: 34 pages
    Date of creation: Feb 2017
    Handle: RePEc:iza:izadps:dp10577
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    1. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
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    3. Levy-Garboua, Louis & Montmarquette, Claude & Simonnet, Veronique, 2007. "Job satisfaction and quits," Labour Economics, Elsevier, vol. 14(2), pages 251-268, April.
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    6. Bruno S. Frey & Alois Stutzer, "undated". "What can Economists Learn from Happiness Research?," IEW - Working Papers 080, Institute for Empirical Research in Economics - University of Zurich.
    7. Clark, A.E., 1995. "Job Satisfaction and Gender: Why Are Women so Happy at Work?," DELTA Working Papers 95-10, DELTA (Ecole normale supérieure).
    8. Rodrigo Montero & Diego Vasquez, 2014. "Job Satisfaction and Reference Wage: Evidence for a Developing Country," Working Papers 48, Facultad de Economía y Empresa, Universidad Diego Portales.
    9. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    10. Louis Lévy-Garboua & Claude Montmarquette, 2004. "Reported job satisfaction : What does it mean?," Post-Print halshs-00203197, HAL.
    11. Di Tella, R. & MacCulloch, R.J.: Oswald, A.J., 1997. "The Macroeconomics of Happiness," Papers 19, Centre for Economic Performance & Institute of Economics.
    12. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
    13. Clark, Andrew E., 2001. "What really matters in a job? Hedonic measurement using quit data," Labour Economics, Elsevier, vol. 8(2), pages 223-242, May.
    14. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    15. Cahit Guven & Claudia Senik & Holger Stichnoth, 2012. "You can't be happier than your wife. Happiness gaps and divorce," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00754595, HAL.
    16. Green, Francis, 2010. "Well-being, job satisfaction and labour mobility," Labour Economics, Elsevier, vol. 17(6), pages 897-903, December.
    17. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
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