Here's an interesting article on money and happiness from Forbes. If you're into scientific research/thoughts on the topic, you may want to read the piece.
The part I picked up on though was the comparison between absolute and relative salaries and which people prefer. Here's the question they pose on this subject:
Would you be happier working for Firm A, which will pay you $94,000 per year and pay others who do the same work $100,000, or for Firm B, which will pay you $89,000 and pay others $83,000?
Firm A, right? It earns you $5k more a year -- why wouldn't you like it better?
Well, studies say something different:
Alas, taking the job with the better salary may maximize your wealth, but it will in all likelihood minimize your happiness. Why? Because right now you are comparing one job with the other, and the job with the larger salary is appealing by comparison.
But it won't take long for the nature of that comparison to change. Once you actually take the job at Firm A, you'll almost surely stop comparing your salary with the salary you might have earned at Firm B. And just as surely, you'll start comparing your salary with the salary of the guy in the next cubicle.
As economist Andrew Oswald notes, "Happiness levels depend inversely on the earning levels of a person's neighbors. Prosperity next door makes you dissatisfied. It's relative income that matters: When everyone in a society gets wealthier, average well-being stays the same."
This is a very interesting finding. Some of my thoughts on the topic:
1. This is probably one reason companies try to keep salaries secret. They don't want Jim knowing that he's doing the same job (and maybe doing it better) than Bill, but getting paid less.
2. I'm always interested in what other people I know (friends, co-workers, past college classmates, etc.) are making and how my salary compares. I earn a decent salary and am happy with it, but when a friend I worked with a decade ago called the other day and told me in casual conversation that he was earning more than I was, I felt bad about it. Why was that?
The piece ends up with the reason why:
Unlike vacations, groceries and real estate, happiness is bought with relative dollars.
So, what do you think about this? I'd love to hear your thoughts and experiences on the issue.
A lack of contentment.
Rather than comparing our old $89k salary with our new $94k salary, we instead compare that to our fellow employees. It's become more of a question of how much we could be making (looking up at others) rather than being content with what we have.
I think it's a self-destructive illness.
Posted by: Jeremy | February 21, 2006 at 03:14 PM
I have had a similar experience. While it wasn't really comparing to coworkers... but to others in the industry, with similar qualifications and capabilities. When I took on my current job, I got a 40% raise. Now, there are several reasons why I got that substantial raise (least job paid squat, I am very, very close to completing my BS, and that really mattered, and I have a lot more experience after holding my previous job for a decent amount of time... for the industry). However, I am now making the industry average for my position, and I am looking at the industry average for the next position I would like to get. The thing that makes it difficult is that I feel fully qualified for that position right now.
And, maybe I do look at coworkers. My boss and I do roughly the same job, except he is ultimately responsible for our performance. He does go to a few meetings that I don't, and he handles the budget, but day-to-day tasks are extremely similar. Coincidentally, his position is the type that I am eyeing in my next career move.
Posted by: Dus10 | February 21, 2006 at 03:28 PM
I work for the government. As such, our salaries are public record. I know how much the (insert perjorative adjective) people who are on the same level of the hierarchy as me make. It makes me mad. While I cannot complain about my salary, for I feel I am well compensated, what the other people make burns my rear end.
Posted by: Dan | February 21, 2006 at 03:37 PM
Knowing that I make less than some of my similarly-qualified peers doesn't really bother me... when I consider that I'm probably doing better in terms of *net worth* than they are, if anything it makes me more satisfied with where I am. Like I'm doing more with less.
However, if I was talking about a larger income disparity (more than 10-20%), I'd likely be more upset by it.
Posted by: Skott | February 21, 2006 at 05:25 PM
I think it's human nature to compare ourselves to and covet what other people have. It's less likely that we'd look at other people and realize what we have that they don't in terms of the intangibles. When I found out that one of my co-workers got a 10% bump up this year, I was mad because I only got a 4% bump. But then I said 'wait a minute...10% of what?' In hard dollars, I'm not sure who actually makes more. I literally make almost twice as much as my dad does. And my dad is a smart, hard working guy. That helps me keep things in perspective.
Posted by: jayfer | February 21, 2006 at 05:35 PM
Personally, I'd prefer to go to the firm where I'm paid less than my co-workers. It shows that there's plenty of room for my salary to grow at that company, plus when hard times come, my co-workers that do the same job I do for a larger salary are more likely to get the axe.
Posted by: Michael | February 22, 2006 at 10:13 AM
I second Jayfer's comments. I would definitely take the higher salary and not complain even if I felt I was doing a better job than those making more. Of course, if the discrepancy was greater, I'd start to be upset, but 5%? No way. There is plenty of unfairness built into corporate culture, being jealous of a 5% salary difference would be my furthest complaint.
Posted by: Steve Howard | February 22, 2006 at 11:57 AM
Pay me more.
Or better yet. Having enough dividend paying stocks to live without working.
Posted by: Jose | February 22, 2006 at 12:03 PM
I think that one reason we feel bad when we find out that one of our friends or peers makes more money than we do is because most of us feel that we work hard, are smart and as deserving as the next guy/gal, so why aren't we getting compensated for that? Even if you are being adequately compensated - or feel relatively happy with the money you make - its likely to bother you a little when your pal (who, perhaps, you think is less qualified or less experienced or an idiot) is bringing in more $ than you.
Posted by: Amanda | February 22, 2006 at 12:54 PM
A while back, several of us (friends and coworkers) got together and compared everything we knew about our compensation. We decided that full disclosure was in everyone's best interest because it wasn't -- isn't -- about competition between us.
It isn't about making each other feel good or bad, it's about having access to the only real yardstick you have to measure your value.
Otherwise, who do you have to give you that value? HR? HR never tells you the truth.
Honest comparison tells you what you need to know about the relationship between (YOU and THE COMPANY) not (YOU and THEM).
It's about how your company feels about you (and how their company feels about them) not about how you feel about each other. And if you're at the same company, so much the better.
I'll just say that we found out all kinds of things. Although every one of us had been told that only we had gotten a bonus ("no one else is getting bonuses this year, so don't talk about it"), we found out that every single one of us got one. We found out that the company, while claiming the need to deflate compensation, had been giving regular raises to some but no raises (over a long, multi-year period) to others.
While we all might have had a few moments of cringing or fear during the discussion, no one came out of the unhappy. Everyone came out of it with a new -- and profound disrespect -- for the employers.
Posted by: Anonymous | February 27, 2006 at 04:25 PM
This problem has to do with one of the seven deadly sins: ENVY
Posted by: Jimmy | January 05, 2009 at 05:28 PM