Nber Working Paper Series 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. David Card Department of Economics 549 Evans Hall, #3880 University of California, Berkeley Berkeley, CA 94720-3880 and NBER [email protected] Alexandre Mas Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 and NBER [email protected] Enrico Moretti University of California, Berkeley Department of Economics 549 Evans Hall Berkeley, CA 94720-3880 and NBER [email protected] Emmanuel Saez Department of Economics University of California, Berkeley 549 Evans Hall #3880 Berkeley, CA 94720 and NBER [email protected]