Does Pay Level Affect Job Satisfaction?

September 22, 2010

Not much, according to a meta-analytic study of 92 separate studies recently published in the Journal of Vocational Behavior (Judge, T.A., et. al. 2010. The relationship between pay and job satisfaction: A meta-analysis of the literature. 77: 157-167.)  The authors concluded:

…level of pay had little relation to either job or pay satisfaction. This indicates that within an organization, those who make more money are little more satisfied than those who make considerably less. Moreover, relatively well paid samples of individuals are only trivially more satisfied than relatively poorly paid samples…The results of this review – the first quantitative review to appear in the literature – suggests that earnings are only weakly satisfying to individuals even when they confine their satisfaction to an evaluation of their pay.(p. 162)

Wow. For employees, these findings suggest that if you want a good job (one you are satisfied with), then pay should not be at the top of your shopping list. Other things like interesting and autonomous work and leadership that is more relational than transactional are better predictors of job satisfaction.

For employers, the authors suggest three important implications (p. 163):

1. Don’t mistake satisfaction with motivation. Pay can be used to motivate workers, even if it cannot be used to satisfy them.

2. Having a satisfied workforce is important, but being a pay leader, by itself, is not a good strategy for improving the job satisfaction of your workforce. Look to other things like better supervision, a better work environment, and jobs designed to be engaging.

3. A policy of high pay dispersion does make sense if the most highly paid workers are the ones you want to retain.  High pay is potentially satisfying to the extent that an individual worker looks at her/his colleagues that are paid at or above market levels and perceives a significant difference.

Be careful with number three. If you are going to adopt such a policy, make sure the requirements for achieving significantly higher pay are unambiguous, available to all, and consistently applied. Nothing will poison a satisfied workforce faster than the perception of unfair and disinterested management practices.

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Comments (2)

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  1. davidburkus says:

    Good post. This research, taken in light of equity theory, really causes me to wonder if pay shouldn’t be some kind of standard index. Heck, perhaps union’s enforcing pay raises on tenure know something we don’t (not likely).

    Bret L. Simmons Reply:

    Not sure I’d go that far, David, but the authors were suggesting purposefully creating an inequity for the few people you want to retain. But if you think about that as a strategy, that is a clear signal to the rest of the folks that you don’t care about them! Not sure that is a good idea. Thanks! bret