Pay Growth, Fairness and Satisfaction

What is it about?

Evidence is provided that workers' happiness depends on their pay change (pay settlement), not just the level of their pay. Evidence is consistent with workers comparing their own pay change with that of other similar workers and to the performance of their industry (firm). Normally, workers are found to feeling disgruntled if their own pay rises by less than the average raise, but this feeling of dissatisfaction disappears if other similar workers also get less, or if their industry is going through hard times. But cutting pay in nominal terms is a different matter: workers find nominal pay cuts insulting even when the firm is doing badly.

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Why is it important?

Evidence from a large-scale representative British survey is presented that, for the first time, tests and backs up evidence previously only available from laboratory or small tightly-controlled field experiments.