Wage increment may not give job satisfaction

The result indicates that wage increases in small, but regular increments – rather than less frequent but higher increases that add up to an equivalent amount – are the most effective way to motivate employees in the long run.

For this study, published in the Journal of Economic Behaviour and Organisation, almost 33,500 observations were analysed; with the majority of individuals indicating a job satisfaction of seven on a zero to 10 scale.

In line with expectations, the study found that job satisfaction was positively influenced by wage increases. However, the rise in job satisfaction after a wage increase is only temporary, as the effect almost fades out within

four years.

According to behavioural-economic theory, this can be explained by the fact that people do not evaluate their income in absolute terms, but rather in relation to their previous income.

Furthermore, people adapt to their new wage level over time, so a higher salary becomes new reference point for future comparisons. Also, negative reactions to wage cuts were also temporary, a finding that researchers again explain with reference point adaptations and social comparisons.