Salary affects employees' happiness at work and job performance

Washington - Employees are happier at work if they are paid a good salary and also if they earn more than those of their peers with whom they compare themselves to, according to a study.

The study that analyzes the relationship between happiness and income from work was carried out at Universidad Carlos III in Madrid (UC3M).

Published by Professor Eduardo Perez Asenjo of UC3M’s Economics Department, it shows that relative earnings affect our happiness and our job performance.

In his analysis, Professor Perez Asenjo, found that if an individual’s earnings are less than those of her/his peers, s/he will work more hours.

What causes this effect? “The most likely explanation lies in social comparisons, although it could also be due to the idea that if those around me earn more than I do, it might indicate that if I work hard I will end up earning as much as they do,” explained Professor Perez Asenjo, who also works at the Banco de Espana (the National Bank of Spain).

The explanation derived from empirical analysis is the first one.

“Therefore, the effect of others’ earnings on my happiness is negative, because I compare myself to them and it makes me unhappy to earn less than them; so I work more hours so that I can earn the same as or more than them,” he said.

This finding can be applied to labor management or to human resource management in companies.

“It might be a relevant criterion to keep in mind, when setting salaries, that an employee is concerned not only with what s/he earns, but also with what those around her/him earn,” stated Professor Perez Asenjo, whose perception is that a happy worker is much more productive than an unhappy one.

“My personal opinion is that employees’ happiness is not really taken into account in work environments, from the company’s perspective,” he concluded.