Inequality at Work: The Effect of Peer Salaries on Job Satisfaction
We use a simple theoretical framework and a randomized manipulation of access to information on peers' wages to provide new evidence on the effects of relative pay on individual job satisfaction and job search intentions. A randomly chosen subset of employees of the University of California (UC) was informed about a new website listing the pay of University employees. All employees were then surveyed about their job satisfaction and job search intentions. Our information treatment doubles the fraction of employees using the website, with the vast majority of new users accessing data on the pay of colleagues in their own department. We find an asymmetric response to the information treatment: workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction, while those earning above the median report no higher satisfaction. Likewise, below-median earners report a significant increase in the likelihood of looking for a new job, while above-median earners are unaffected. Our findings suggest that job satisfaction depends directly on relative pay comparisons, and that this relationship is non-linear.
We are grateful to Stefano Dellavigna, Ray Fisman, Kevin Hallock, Lawrence Katz, Andrew Oswald, and numerous seminar participants for many helpful comments. We thank the Princeton Survey Research Center, particularly Edward Freeland and Naila Rahman for their assistance in implementing the surveys. We are grateful to the Center for Equitable Growth at UC Berkeley and the Industrial Relations Section at Princeton University for research support. This paper reflects solely the views of the authors and not necessarily the views of the institutions they belong to, nor those of the National Bureau of Economic Research.
- For people paid below the median for their department and occupation ... information [on pay of peers] has a negative effect...on job...
David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October. citation courtesy of