Imagine you could live in one of two worlds where the price of goods and services were the same: in the first world, you earn €50,000 a year, while other people get €25,000. In the second, you earn €100,000, while others get €200,000. Which would you choose?
If it’s the first world, you’re not alone. Researchers at Harvard University found that half of people did not favour what was effectively a doubling in salary if it meant they would end up earning less than those around them - see https://www.albany.edu/~gs149266/Solnick%20&%20Hemenway%20(1998)%20-%20Positional%20concerns.pdf.
Our colleagues at eZonomics have written a very interesting article about this. Here’s an extract...
Psychologists at the University of Warwick measured the wellbeing of 80,000 people
, and found that where a person’s income ranked against their peers predicted their general satisfaction with life. The higher they ranked, the happier they were. Their actual income didn’t matter. “Earning a million pounds a year appears to be not enough to make you happy if you know your friends all earn two million a year,” said lead researcher Chris Boyce.
The findings could explain why people in rich nations have not become any happier on average over the last 40 years despite a substantial increase in average incomes. And Facebook, Twitter and Instagram may be adding fuel to the disillusionment fire.
A study (https://arxiv.org/pdf/1507.08863.pdf) by Sapienza University of Rome and the government statistics service of Luxembourg, STATEC, suggests that online networking was strongly linked to income dissatisfaction. It could be because pals meeting up in person would be less likely to brag and make others in the group feel inadequate, whereas online, people behave differently.
Facebook newsfeeds provide “an onslaught of idealised existences” – engagement rings, new jobs, luxury holidays – from not just friends, but former friends and distant acquaintances, the researchers said.
“Online social networks not only offer more frequent opportunities for comparison, but they also offer more opportunities for upward comparisons, i.e. towards those who look better off,” they said. “This is due, in particular, to the prevalently positive nature of information that people choose to display on Facebook".
That self-comparison can trigger negativity is one reason the sharing of salary information with colleagues is taboo in many places. Indeed, some companies have rules forbidding employees telling others what they earn written into their contracts, to prevent resentment brewing
So if you’re still stuck in the 9-5 and you’ve just found out your colleagues are earning considerably more than you, what should you do? Asking your manager to spell out exactly how the company decided your salary might help. Pay-data firm Payscale found that the majority of workers believe they are being underpaid, even if they are paid above the market rate (see https://www.payscale.com/data/pay-satisfaction). The lack of transparency in many organisations may be to blame, they suggest.