Does Wage Rank Affect Employees' Wellbeing?

Gordon D. A. Brown (), Jonathan Gardner (), Andrew Oswald and Jing Qian ()
Additional contact information
Gordon D. A. Brown: University of Warwick
Jonathan Gardner: Watson Wyatt LLP
Jing Qian: University of Warwick

No 1505, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: What makes workers happy? Here we argue that pure ‘rank’ matters. It is currently believed that wellbeing is determined partly by an individual’s absolute wage (say, 30,000 dollars a year) and partly by the individual’s relative wage (say, 30,000 dollars compared to an average in the company or neighborhood of 25,000 dollars). Our evidence shows that this is inadequate. The paper demonstrates that range-frequency theory – a model developed independently within psychology and unknown to most economists – predicts that wellbeing is gained partly from the individual’s ranked position of a wage within a comparison set (say, whether the individual is number 4 or 14 in the wage hierarchy of the company). We report an experimental study and an analysis of a survey of 16,000 employees’ wage satisfaction ratings. We find evidence of rank-dependence in workers’ pay satisfaction.

Keywords: rank; wages; job satisfaction; wellbeing (search for similar items in EconPapers)
JEL-codes: J28 J30 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2005-03
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Published - published in: Industrial Relations, 2008, 47 (3), 355-389

Downloads: (external link)
https://docs.iza.org/dp1505.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp1505

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().