Income and Job Satisfaction

The link between income and happiness is often explained by the Easterlin paradox: income and happiness in a country are positively related at a point in time but unrelated, over time. So, at any point in time, money did buy happiness but, over time, the level of happiness in a country did not rise by much as it grew richer. This paradox was explained by the fact that higher income conferred two benefits to individuals: consumption benefits (in the sense of being able to afford more, and better, goods and services) and status benefits (in the sense of enjoying superior status relative to one’s peers). But what is not clear is the identity of comparator group for the purpose of deriving status benefits. This chapter uses a novel set of data to define parents as the comparator group and defines the status a person derives from their income in relation their parents’ income. Another issue in the amount of happiness that one can extract from income concerns the circumstances in which it is earned. Given that paid employment is central to the lives of many individuals, and that many persons spend a substantial part of their lives in paid employment, an understanding of people’s feelings of well-being in the workplace or, equivalently, their levels of “job satisfaction”, is of paramount importance to public policy. This chapter examines the strength of a variety of factors in determining the intensity of job satisfaction in 33 countries. The empirical foundation for the study is provided by data for nearly 22,000 employed respondents, pertaining to the year 2000, obtained from the World Values Survey.