Wage Comparisons in and out of the Firm. Evidence from a Matched Employer-Employee French Database
Olivier Godechot et Claudia Senik
Do firms have an interest in introducing wage transparency? A recent article (1) illustrated the deleterious effects that followed revelations about salaries in some Californian universities, including the demoralisation and even resignation of some of the lowest paid employees. But a study carried out in France had quite different results. Olivier Godechot and Claudia Senik matched a study in 2009 of 3,000 employees in the private sector (SALSA, “salaries seen by the employees”) with the file of a social insurance firm (DADS, Déclarations Annuelles de Données Sociales).
The authors made a surprising observation: no matter what their own remuneration, employees declare themselves more satisfied with their wages and their work when they learn that others are well paid. This satisfaction is even greater when the median wage, the average wage and the wages of the best-paid 25 per cent best are high. This is true for all employees, no matter what their position in the hierarchy of the firm – whether they are below or above the median salary, for example. The effect is particularly strong among the young, who have longer careers ahead of them. However, a second phenomenon appears to nuance the first finding: relative frustration. The higher the salary of similar colleagues (in terms of age and profession), and or the higher the salary of the best-paid one per cent in the firm, the more the satisfaction decreases.
(1) "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction”, D. Card - A. Mas - E. Moretti et E. Saez (American Economic Review)
Original title of the article: Wage Comparisons in and out of the Firm. Evidence from a Matched Employer-Employee French Database
Published in: PSE Working Paper , n°2013-36
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