The researchers, University of Warwick Economists Professor Andrew Oswald and Dr Jonathan Gardner (Joanthan now with Watson Wyatt) and University of Warwick psychology researchers Professor Gordon Brown and Jing Qian studied data from 16,266 individuals from 886 separate actual workplaces, and also carried out two further psychological experiments. They presented their findings recently to a conference at the Brookings Institution in Washington.
The results from the analysis of happiness, pay and rank data from the 16,266 individuals found that the level of actual pay, or the average level of pay in an organisation, had very little effect on how happy people were with the level of respect they had within that organisation. It also had little effect on how happy people were with their achievements within that organisation."
However when one looked at people's overall rank position the researchers found that did produce a significant impact on both how happy people were with the level of respect they had within that organisation and how happy people were with their achievements. When asked to rank how happy they were with their pay the researchers found that rank within an organisation had 50%-60% more effect on that level of happiness than the actual amount that people were paid!
In the first of the psychological experiments the research team asked a group of students to rank their satisfaction with a level of pay if it was offered to them as a starting graduate salary. The students were shown the same level of starting salaries but in a range of tables so, for instance, some saw a salary of £19.5K positioned as the fifth lowest wage in table whereas others saw that salary in a table as the second lowest. The experiment subjects clearly demonstrated that even if actual pay levels for everyone were exactly the same placing them in different rank orders created different levels of happiness.
In a second experiment students heard tones from a range of nine musical tones and were asked to judge were each tone came in that range. They were given a small cash reward for each tone judgement and then also asked to say how happy they were with that reward (of which they could actually keep a small percentage of at the end of the experiment). However the students were presented with different award distributions- a high-reward one in which they were rewarded with a number of pounds and a low distribution in which the same numbers were used but presented as pennies. The researchers found a clear negative correlation between current satisfaction rating and preceding reward values. The results indicated that reward satisfaction ratings were determined partly by comparison with other, recently-presented, rewards. A given level of reward produces a higher satisfaction rating if lower rewards have been received and rated in the recent past.