Should we care about pay ratios? Dealing with ISSP questions on actual and ideal wages from a comparative perspective

Abstract

ABSTRACT Questions on actual and ideal wages of various occupations are distinctive features of ISSP Social Inequality modules which can be used to quantify respondents’ perceived and ideal wage inequality, by computing pay ratios ex-post. However, recent research has raised harsh criticism of pay ratios, emphasizing that they suffer from anchoring bias, ratio bias, and, more generally, low validity. This article investigates what adjustments can be made to improve the validity of pay ratios for comparative analyses. It is found that country comparisons are very sensitive to adjustments and have major limitations. Nevertheless, as attitudes expressed by word-based items do not measure the extent of inequalities that respondents are willing to tolerate, further research is needed to find out ways to fix problems with pay ratios at the level of data collection rather than of data analysis. The article concludes with some suggestions regarding data collection.