Relative Income and Job Satisfaction: Evidence from Australia

Abstract

Using the first six waves of the Household, Income and Labour Dynamics in Australia (HILDA) Survey dataset, a linear fixed effects model is used to examine the link between relative income and overall job satisfaction in Australia. In this paper, relative income is constructed using cell average by age group, gender and education level. The findings indicate that (i) relative income has a significant negative impact on overall job satisfaction for men but not for women; and (ii) for the whole sample and for men, income comparisons are asymmetric and upwards, meaning that the loss in overall job satisfaction by the poor from having an income below that of their reference group is significantly greater than the gain by the rich from knowing that they earn above that of their reference group. Overall, the evidence found is consistent with Dueseneberry’s hypothesis that relative income matters and comparison effect is asymmetric and mostly upwards.