Pay Referents and Satisfaction with Pay: Does Occupational Proximity Matter?

Abstract

We explore whether employees compare their pay to the pay of others in a similarly prestigious occupation and, if so, whether this comparison has a negative impact on pay satisfaction. Using an experimental vignette methodology, Study 1 found that people are more inclined to compare with others from a similar or identical occupation and that comparison negatively impacts pay satisfaction. This comparison and its negative effect is particularly strong in high-prestige occupations. Based on survey data, Study 2 also showed that the average pay of others in occupations of similar prestige is negatively correlated with employees’ pay satisfaction. This negative correlation was also stronger in higher-prestige occupations. Our analysis highlights the importance of occupational prestige as a main factor influencing pay comparison.