As we reported very recently, Glassdoor provides a lot of useful information about the job market, employee compensation, and employee satisfaction.
Consider the observations for Glassdoor by Mario Nuñez in “Does Money Buy Happiness? Link Between Salary and Employee Satisfaction”:
“To isolate the relationship between money and happiness, we ran a linear regression with company satisfaction rating as the response variable and log-transformed total pay as the explanatory variable. We also included controls for location (state), gender, education, years of experience, job title, employer size, industry, and employee status (i.e., was the employee working for that company at the time the review was written?). For ease of interpretation, we transformed the company satisfaction rating to a scale of 0 to 100, with 0 being completely dissatisfied (a 1-star rating) and 100 being completely satisfied (a 5-star rating).”
“Our model suggests that a 10 percent increase in employee pay is associated with a 1 point increase in overall company satisfaction on a 0-100 scale, controlling for all other factors. If an employee making $40,000 per year was given a raise to $44,000 per year, his or her overall employee satisfaction would increase from 77 percent to 78 percent. And it’s important to note that there is a diminishing return to happiness for every extra $1,000 in earnings. Although this effect is statistically significant, it is small.”
“Since money doesn’t seem to have a huge effect on employee satisfaction, what other factors influence job satisfaction?”
Impact of Factors Beyond Salary on Employee Satisfaction
9 Replies to “Is There a Link Between Job Satisfaction & Salary ?”
The relationship between salary and satisfaction seems like a downward opening parabola. The satisfaction will decrease, when the number of salary excess the highest point. That is true and easily understand, after all, money can’t bring everything and solve all the problems. It is the time to care about more emotional and psychological part of employees.
To some extent, money does buy happiness. In a study done by Sonja Lyubomirsky, a professor of psychology at the University of California–Riverside and author of the book The How of Happiness agrees, “happy people are better partners and members of society, flexible and ingenious thinkers, productive employees, successful leaders and negotiators, and resilient when faced with hardship. They have stronger immune systems and are overall healthier with longer life expectancies.” Money is a factor in happiness, but only up to about $70,000. After $70,000 per year, it doesn’t matter at all. There are some societies with a very low GDP but a high rate of happiness, and the complete opposite – societies with high GDPs but low levels of happiness.
Studies have shown that about 40% of happiness humans can control. 50% is genetic, and 10% is depending on personal circumstances out of our control. I think that companies should encourage employee happiness by creating a culture that places value and emphasis on personal health and empowerment. I think the happiest employees are happy because of employee incentive programs, benefits, career advancement programs and a good work-life balance.
It makes sense to me that job satisfaction and salary are not significantly related. Anyone would be happy with a pay raise, but often a pay raise may also mean either a promotion or some kind of increase in responsibility. Because those who earn more are in higher level positions, they usually have a lot more work to do and I have personally seen them more stressed out than lower level employees. Because of this stress, they may be happy that they’re earning more money but they’re unhappy with the new level of responsibility so in the end it kind of evens out.
I think in the first stage, there is positive relationship between money and happiness. Just like Maslow’s hierarchy of needs, money can provide the basic needs for everyone to survive. To the second stage, perhaps money cannot replace the satisfaction since something are more valuable, such as family time.
But I also have another thinking. If someone owns a large number of welfare, he or she can hire the professional people to manage the welfare, then he or she can still has the own time to do whatever he or she wants.
It’s an interesting result about the relationship between salary and job satisfaction. Though the influnce of salary is limited, I believe the money’s impact will be more crucial for the developing countries which mean that the same money will make an employee of a developing country more satisfied with his or her job than the one in a develped country.
We were surprised to see an employee’s culture and values rating so much more important for job satisfaction than compensation and work-life balance ratings, since the latter two factors are frequently discussed in the HR world. However, on further reflection an employee’s culture and values rating probably represents a combination of factors that contribute to overall well-being such as company morale, employee recognition, and transparency within the organization.
“Does money buy happiness?” I don’t think there should be a link between salary and happiness. Higher salary might be make your life better, but it might also make you busy in work and have no time to enjoy your life. In other words, you have no time to spend your money.
It is surprising that there is not a larger effect on job satisfaction and salary, I assumed that the link would be larger. The one percent is relatively insignificant to the company.