Does Wage Rank Affect Employees’ Well‐being?

Abstract

How do workers make wage comparisons? Both an experimental study and an analysis of 16,000 British employees are reported. Satisfaction and well‐being levels are shown to depend on more than simple relative pay. They depend upon the ordinal rank of an individual's wage within a comparison group. “Rank” itself thus seems to matter to human beings. Moreover, consistent with psychological theory, quits in a workplace are correlated with pay distribution skewness.