Are More Satisfied Workers Earning More? Depends on the Age

Abstract

In this paper we study the relationship between job satisfaction and wages using data from the 2013 Scientists and Engineers Statistical Data System (SESTAT). Job satisfaction is positively correlated with wages, however, this effect diminishes as job satisfaction increases, suggesting more satisfied workers are not earning more. This non-monotonic effect is particularly strong in the 20-39 age group. We find that one standard deviation increase in job satisfaction from the 25th percentile is associated with a 12.3% increase in wages, while one standard deviation increase in job satisfaction from the 75th percentile is associated with a 7.3% change in wages. These patterns are consistent with a search and matching model that imposes a negative search cost for higher wages, but less reward in higher wages from a concave utility function in wages.