BritishJournal of Industrial Relations

342 June 1996 0007-1080 pp. 189-217

Job Satisfaction in Britain

Andrew E. Clark

Abstract

Little recent empirical work in economics or industrial relations has examined

job satisfaction, despite its demonstrated correlation with labour market
behaviour such as quits, absenteeism and productivity. This paper uses
information from a study of 5000 British employees to investigate the
relationship between three measures of job satisfaction and a wide range of
individual and job characteristics. Notably, men, workers in their thirties, the
well-educate4 those working longer hours and workers in larger establish-
ments have lower levels of job satisfaction. The estimated job satisfaction
equations are used to calculate a measure of the shadow wage and to provide
some evidence that is consistent with the existence of non-compensating
differentials in the industry and occupational wage structure.

1. Introduction

Job satisfaction remains a variable that has been relatively little studied in
economics and industrial relations, despite a wealth of papers in other social
science disciplines such as psychology, sociology and management science.’
The analysis of job satisfaction is of interest for two reasons. First, it is a
measure of individual well-being, and many social scientists would consider
the distribution of welfare to be one of their pMcipal concerns. Second, the
analysis of job satisfaction may give us a number of insights into certain
aspects of the labour market. Workers’ decisions about their labour force
participation, whether to stay on at a job or to quit, and how much effort to
devote to their job are all likely to depend in part upon the workers’
subjective evaluation of their work, in other words on their job satisfaction.
The other side of the labour market consists of lirms, who prefer that their
workers be satisfied.
This paper uses both bivariate and regression techniques to examine the
distribution of three different measures of job satisfaction in a recent British
data set. The empirical results relate workers’ job satisfaction to individual
characteristics, such as gender, age and education, and to job character-
istics, such as establishment size, promotion, hours and pay. Males, workers
Andrew Clark is with the O E D , DEELSA, in Paris.

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108 cowley Road, Oxford, OX4 lJF, and 238 Main Street, Cambridge.MA 02141, USA.
190 British Journal of Industrial Relations
in their thirties, those with higher levels of education, workers in larger
establishments, workers without opportunities for promotion and those
working longer hours are found to have relatively low levels of job
satisfaction. Income is strongly positively associated with one measure of
satisfaction -pay -but much less strongly correlated with the overall level
of job satisfaction. This finding can be explained by the presence of
unobserved omitted variables, which are correlated with both overall
satisfaction and income, or by the presence of comparison effects in the job
satisfaction function, whereby some characteristics of the worker’s job are
compared with the job characteristics of some reference group, or with the
workers’ own expectations about their jobs. The observed pattern of job
satisfaction responses by gender, age and education is argued to be
consistent with the presence of such relativities.
Section 2 presents a brief discussion of the concept of job satisfaction. The
data and the distribution of job satisfaction are presented in Section 3. The
fourth section analyses statistically the relationship between job satisfaction
and a number of individual and job characteristics. Section 5 uses the results
of the regression analysis to estimate job satisfaction responses for a number
of ‘benchmark’ individuals. Section 6 proposes a new methodology, based
on these regressions, for the calculation of the extra income necessary to
compensate a worker for an extra hour of work (the ‘shadow wage’) and
investigates the claim that inter-industry and inter-occupational wage
differentials represent rents to workers, and do not compensate for un-
observed ability or job characteristics. Section 7 concludes.

2. Job satisfaction and utility

The Concept of Job Satisfaction

A classic reference for the meaning of job satisfaction is Locke (1976), who
traces interest in workers’ subjectivewell-being back to the ideas of scientific
management and fatigue reduction at the beginning of the century. Locke
definesjob satisfaction as ‘a pleasurable or positive emotional state resulting
from the appraisal of one’s job or job experiences’ (p. 1300). Satisfaction,
according to different schools of thought, depends variously on the
individual’s expectations, needs (physical and psychological) and values.’
More specifically,work attributes that involve mental challenge (autonomy,
complexity, the opportunity to use abilities and to learn new ones,
responsibility, etc.) lead to satisfaction, although the relationship is
concave: too much mental challenge can bring about dissatisfaction as well
as too little. Hence both challenge and some measure of achievement are
important. Locke also highlights the link between personal interest and
recognition and job satisfaction. The role of pay is discussed at length, from
the basis of ‘equity’, ‘discrepancy’ or ‘relative deprivation’ theories, which
imply that it is not only the absolute level of pay that matters to workers but
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 Job Satisfaction in Britain 191
also the level of pay relative either to what they expected or to what others
receive. This idea of relative utility is discussed further below.
Locke’s preferred formulationof satisfaction is as the weighted sum of the
discrepancies between how much of a certain valued aspect of working a job
delivers and how much of this aspect the individual desires or expects; the
weights in this summation are given by the individual’s valuation of the
different aspects of the job. Higher job satisfaction may then come about
from improvements in the objective aspects of the job, from reduced
expectations or desires regarding the job, or equally from a realignment of
values so that dissatisfying aspects of the job are downplayed, while those
that please are given greater weight.
My reading of most psychological research is that, in line with Locke, job
satisfaction is readily identified with individual well-being. In sociology,
however, this conclusion is less clear. Tausky (1992) draws a distinction
between theories of work as a necessary evil in order to survive and work as
an activity pleasurable in itself, although he notably talks of satisfaction as
being a motivation towards action in both cases. Hodson (1991) provides a
scathing critique of the entire concept of job satisfaction, arguing that it is
largely irrelevant for workers’ day-to-day activities and that it is theoretic-
ally naive, paying too little attention to the multitudinous emotional states
underlying individual well-being; he proposes instead a behaviour-based
classification of workers? On the other hand, both Hakim (1991) and
Veenhoven (1991) accept job satisfaction as an index of individual well-
being without any qualms.
Economists were relative latecomers to the job satisfaction field. One of
the first economic papers on this subject, Hamermesh (1977), uses job
satisfaction data, which is considered as a direct index of utility from
working, to test a model of occupational choice based on workers’
maximization of their expected lifetime utility. However, Freeman (1978)
concludes ‘that subjective variables like job satisfaction. .. contain useful
information for predicting and understanding behaviour, but that they also
lead to complexities due to their dependency on psychological states’
(p. 140). It is probably fair to say that economists’ attitudes towards
subjective measures of well-being remain sceptical, although a recent
resurgence of interest in the analysis of subjective variables may change
attitudes in time.

Relative Utility
This paper considers individuals’ responses to questions about job satisfac-
tion as a proxy measure of their utility from working. Following Clark and
Oswald (1996), we define a ‘life satisfaction’ function, v , as v = (u, p),
where u is utility from work, and p is utility from the non-work spheres of
life. The subject of this paper, job satisfaction, is argued to reflect u, which
can be considered as a sub-utility function reflecting the level of well-being
that the individual receives from all aspects of his or her job.
8 Blackwell Publishers Ltd/London School of Economics 1996.
192 British Journal of Industrial Relations
There is no agreement in the social sciences about the form that the
function u takes. The standard economic model is that individual utility from
working depends positively on income, y, and negatively on hours of work,
h, and that it depends also on a set of other individual and job character-
istics, which are captured in a vector, z:
u = ~ ( yh,, z). (1)
An alternative specification considers that utility contains a relative
component, i.e. that the individual may make comparisons between hisher
own level of some of the elements of u and the corresponding level in some
reference group. Veblen (1899) was one of the first proponents of such a
view in economics, the formal analysis of which is contained in Duesenberry
(1949). The idea of individual well-being as depending on some kind of
comparison process has heavily influenced social psychology (Adams 1963;
Homans 1961) and sociology (Runciman 1966).
Suppose that the individual’s own income, y, is compared with that of
some reference group, y*. Then an alternative specification of (1) is
u = ~ ( yy*,
, h, z). (2)
The higher is the level of y*, the lower is the individual’s own income
compared with y*, i.e. the lower is the individual’s relative income, and thus
the lower is the individual’s level of utility. Of course, comparisons may take
place over any number of job characteristics, and equation (2) serves only to
illustrate the general principle of relative utility. However, income is often
considered to be one of the most important aspects of the job for the worker,
and the level of others’ earnings is more widely known than is, for example,
the stress of others’ jobs, the size of others’ offices or their promotion
opportunities, about which comparisons could also take place.
The empirical testing of equations such as (2) is in its infancy, for two
reasons. First, as mentioned above, it is not clear over which elements of the
utility function comparisons take place. Second, and more importantly, the
researcher almost never has information on how the individual’s y* is
calculated; i.e., of whom does this reference group consist? Without this
information it is necessary to make some assumptions about the formulation
of y*. Hence any empirical test of relative utility always involves a joint
hypothesis: that y* is important, and that the specification used to calculate
it is the correct one. Nevertheless, a small body of empirical literature has
found evidence consistent with such comparison effects in survey responses
to questions on well-being (Clark 1995a,c; Clark and Oswald 1996;
Hamermesh 1977;Uvy-Garboua and Montmarquette 1994;and Sloane and
Williams 1994), in the income levels that individuals assign to different
verbal labels such as ‘excellent’, ‘good’, ‘sufficient’ and ‘bad’ (Hagenaars
1986; Melenberg 1992;and van de Stadt et al. 1985) and in individual savings
behaviour (Kosicki 1987).

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 Job Satisfaction in Britain 193
3. Data

The data used in this paper come from wave 1 of a random sample of
approximately 10,OOO individuals in 5500 British households. This data set,
the British Household Panel Survey (BHPS), includes a wide range of
information about individual and household demographics,health, employ-
ment, values and finances; for more details see Rose et al. (1991). The data
were collected in late 1991.
The job satisfaction data come from the following questions asked of all
employees in the BHPS. Initially, individuals were asked to rate their
satisfaction levels with seven specific facets of their job promotion
prospects, total pay, relations with supervisors,job security, ability to work
on their own initiative, the actual work itself, and hours of work. Each of
these criteria was to be given a number from 1 to 7, where a value of 1
corresponded to ‘not satisfied at all’, a value of 7 corresponded to
‘completelysatisfied’, and the integers from 2 to 6 represented intermediate
levels of satisfaction. After they had rated their levels of contentment with
this Iist of topics, individuals were asked a final question: ‘All things
considered, how satisfied or dissatisfied are you with your present job
overall using the same 1-7 scale?’
One objection that may be raised to the use of job satisfaction responses
as measures of individual well-being is that satisfaction is subjective and
hence cannot be compared across individuals. How then do we know that
the cross-sectionanswers to subjectivequestions like these contain informa-
tion and are not just random draws? A small body of empirical research in
economics and psychology has considered this question by relating satisfac-
tion scores to subsequent observable labour market behaviour. Freeman
(1978) uses American panel data to show that job satisfaction is a signilicant
predictor of quits, with an effect that is, in two of the three data sets
examined, at least as powerful as that of wages; Akerlof et al. (1988) and
McEvoy and Cascio (1985) reach the same conclusions! Other research has
found that job satisfaction is negatively correlated with absenteeism (Clegg
1983) and with non-productive and counter-productive work (Mangione
and Quinn 1975). If job satisfaction data were purely idiosyncratic,it is hard
to see how the above results could have been obtained. Although it is
unlikely that these data are noise-free, the above research results suggest
that there is information in its cross-sectionanalysis?
This paper will analyse three of the job satisfaction measures described
above: the first, satisfaction with pay, measures the worker’s subjective
evaluation of the extrinsic observable monetary reward from working; the
second, satisfaction with the work itself, reflects the intrinsic nature of the
job; the third, overall job satisfaction, is a useful summary measure!
Table 1 presents the simple distribution of these three measures. The
modal response for all measures of satisfaction is 7, the highest value:
the median value for overall job satisfaction and for satisfaction with the
work itself is 6, while that for satisfaction with pay is 5. There are
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194 British Journal of Industrial Relations
TABLE 1
Distribution of Reported Job Satisfaction Levels

Pay satisfaction Satisfaction with Overall satisfaction

work itself

N % N % N %

1059 20.4 2148 41.3 1645 31.7

735 14.2 1141 22.0 1396 26.9
888 17.1 771 14.8 995 19.2
1045 20.2 698 13.4 653 12.6
535 10.3 186 3.6 237 4.6
244 4.7 66 1.3 90 1.7
680 13.1 185 3.6 178 3.4
- - - ~~

5186 100.0 5195 100.0 5194 100.0

Notes: These numbers are based on weighted data. The results using
unweighted data are almost identical.

substantial tails of dissatisfied workers in the distribution, especially for pay

satisfaction: 9.7% of workers report overall job satisfaction of 3 or less, with
the respective figures for work itself and pay satisfaction being 8.4% and
28.1%. British workers seem well satisfied with their jobs overall, and with
the nature of the work itself, but less so with their pay.
Table 2 summarizes the bivariate relationships between job satisfaction
and a number of worker and job characteristics. Details of all variables are
contained in Appendix A. The mean level of the satisfaction score is
reported for each characteristic, as is the percentage who are ‘highly
satisfied’ (reporting satisfaction of 6 or 7 on the 1-7 scale). The majority of
these correlations carry over to the multivariate regression analysis of
satisfaction, the results of which are reported in Appendix B. As the
dependent variable is ordinal (i.e., job satisfaction of 6 is not twice as high as
job satisfaction of 3), Ordered Probit techniques have been used for these
estimations (see Zavoina and McKelvey 1975).’ Variables and sets of
dummies have been dropped at the 5% significance level in all regressions.
TABLE 2
Job Satisfaction Meansa

pay Work itself Overall

Mean %very Mean %very Mean % very

satisfied satisfied satisfied

Overall 4.48 34.8 5.67 63.6 5.50 58.7

Individual characteristics
Male 4.33** 31.2** 5.56** 60.6** 5.31** 52.9**
Female 4.65 38.7 5.78 66.1 5.71 65.0
1619 4.24** 28.7** 5.40** 54.9 5.55** 59.1**
20-29 4.27 29.0 5.40 55.6 5.32 53.4
30-39 4.46 33.6 5.58 61.0 5.40 56.1
40-49 4.52 35.4 5.75 66.4 5.50 58.6
50-59 4.72 41.5 6.03 74.5 5.72 66.3

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 Job Satisfaction in Britain 195
60+ 5.21 58.2 6.43 85.1 6.15 15.5
Health-excellent 4.60** 31.3* 5.81** 68.2** 5.68** 65.0**
Health-good 4.48 34.1 5.65 62.2 5.41 51.3
Health-ther 4.21 32.4 5.46 58.1 5.25 50.9
Education-higher 4.55 35.0** 5.68** 63.1** 5.38** 55.9**
Education-A/O/nursing 4.44 31.9 5.54 60.2 5.44 51.1
Education-ther 4.48 38.2 5.82 61.5 5.61 62.9
White/Chinese/O ther 4.49** 35.0 5.61 63.5 5.51* 59.0
Black 3.11 25.2 5.51 61.8 5.26 50.9
IndianPakistanBangladeshi 4.50 32.0 5.89 61.3 5.08 50.1
Married 4.62** 38.1** 5.16** 66.3** 5.56** 60.6**
Separated 4.21 30.1 5.51 65.6 5.51 64.8
Divorced 4.40 33.2 5.82 68.5 5.55 60.1
Widowed 5.01 49.8 6.48 90.1 6.25 19.1
Single 4.20 26.8 5.42 55.9 5.33 53.2
Renter 4.35** 34.0 5.12* 65.1 5.61* 61.8*
Non-renter 4.52 35.0 5.65 63.2 5.41 51.9
Inner London 4.04* 21.7* 5.48 58.3* 5.06** 48.9
Outer London 4.41 31.3 5.52 58.2 5.49 51.9
Rest of South East 4.56 35.2 5.68 63.3 5.53 59.1
South West 4.60 31.3 5.68 63.9 5.56 60.8
East Anglia 4.44 31.0 5.12 69.4 5.59 59.1
East Midlands 4.34 33.3 5.18 64.3 5.56 59.5
West Midlands conurbation 4.31 35.1 5.13 63.9 5.61 59.3
Rest of West Midlands 4.28 31.2 5.15 66.1 5.45 55.8
Greater Manchester 4.53 33.1 5.65 64.0 5.50 51.1
Merseyside 4.35 28.6 5.56 59.8 5.54 51.5
Rest of North West 4.68 42.2 5.61 65.1 5.56 61.5
South Yorkshire 4.35 30.0 5.52 60.2 5.35 56.0
West Yorkshire 4.43 34.4 5.86 10.4 5.45 61.4
Rest Yorkshire & Humberside 4.53 39.3 5.19 66.1 5.60 61.6
Tyne and Wear 4.59 38.5 5.31 61.9 5.31 53.1
Rest of North 4.68 39.8 5.66 64.0 5.62 61.3
Wales 4.46 30.1 5.15 64.1 5.58 61.1
Scotland 4.61 38.3 5.66 63.0 5.46 57.1
Work values
Promotion 3.82** 11.8** 5.30** 51.8** 5.23** 46.5**
Pay 4.15 21.6 5.11 48.9 5.01 43.3
Relations at work 4.65 41.1 5.95 68.1 5.89 69.6
Job security 4.49 35.1 5.69 63.3 5.59 60.6
Actual work itself 4.54 35.0 5.82 69.3 5.53 61.4
Hours 5.00 49.9 5.90 10.2 5.94 68.1
Initiativelsomething else 4.69 31.2 5.11 68.1 5.56 61.6
Job characteristics
Monthly pay
4500 4.62** 41.0** 5.81** 61.1** 5.84** 68.3**
f5004999 4.13 26.9 5.48 58.6 5.35 55.2
f100041499 4.43 30.3 5.63 61.3 5.31 52.6
f1500+ 4.99 44.4 5.19 66.1 5.48 58.2
4 6 hours pw 5.10** 49.4** 5.83** 69.0** 5.93** lO.O**
16-30 hours pw 4.82 44.6 5.85 61.1 5.84 68.3
30-40 hours pw 4.36 30.8 5.55 59.8 5.36 54.5
>40 hours pw 4.29 31.6 5.13 66.1 5.41 56.3
Agriculture 4.82** 40.1* 5.92** 13.7** 5.88** 62.0**
Energy 5.11 44.9 5.31 59.6 5.34 56.8
Extraction 4.54 34.1 5.41 56.1 5.35 54.1
Engineering 4.29 28.8 5.59 62.1 5.15 48.1
Other manufacturing 4.26 34.1 5.40 55.1 5.24 49.3
Construction 4.18 28.6 5.88 61.3 5.48 51.0

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196 British Journal of Industrial Relations
Distribution 4.45 35.2 5.62 63.3 5.52 60.2
Transport 4.38 32.7 5.55 57.4 5.19 51.3
Finance 4.68 35.7 5.48 55.1 5.49 57.4
Other services 4.55 36.6 5.91 70.8 5.75 66.3
Managers 4.84** 41.2** 6.02** 75.8** 5.60** 64.1**
Professionals 4.43 30.5 5.81 65.9 5.44 55.8
Associate professionals 4.56 35.3 5.89 70.0 5.57 60.5
Clerical 4.66 36.3 5.48 57.1 5.51 59.2
Craft 4.09 26.6 5.60 60.9 5.29 51.6
Personal 4.47 37.1 6.01 75.4 5.85 69.4
Sales 4.40 34.8 5.58 61.0 5.62 60.7
Plant operative 4.03 28.2 5.35 55.2 5.09 47.4
Other 4.77 43.3 5.47 57.2 5.60 61.3
Establishment size:1-24 4.52 37.4* 5.86** 68.6** 5.69** 63.9**
Establishment size:25-199 4.43 32.8 5.62 62.4 5.45 57.5
Establishment size:200+ 4.51 34.2 5.48 58.7 5.32 53.6
Union 4.45 34.2 5.60** 62.3 5.38** 54.5**
Non-union 4.50 34.9 5.72 64.6 5.56 60.7
Incentive payments 4.62** 36.2 5.57** 60.9* 5.44 57.0
No incentive payments 4.43 34.2 5.70 64.5 5.52 59.3
Promotion opportunities 4.60** 35.1 5.68 63.2 5.58** 60.2*
No promotion opportunities 4.36 34.4 5.65 63.9 5.42 57.2
Manager 4.56* 35.2 5.86** 69.0** 5.55 60.3
Non-manager 4.44 34.5 5.56 60.6 5.47 57.9
Temporary/contractjob 4.46 36.4 5.57 62.6 5.42 57.8
Permanent job 4.49 34.6 5.68 63.9 5.51 58.7
Second job 4.29; 31.0 5.57 60.3 5.42 57.0
No secondjob 4.50 35.2 5.68 63.9 5.51 58.9

“Very satisfied’ denotes job satisfaction of 6 or 7 on the 1-7 scale. For each set of
characteristics,the asterisks denote the significance level of the F-test that the means are not
identical: * significant at the 5% level and ** s i w c a n t at the 1% level. All figures refer to
weighted data.

4. Individual and job characteristics

Gender
Table 2 shows that nearly two-thirds of women report overall job satisfac-
tion of 6 or 7, compared with just over one-half of men; a similar difference
exists for satisfaction with pay and with the work itself. Moreover, when
other characteristics are controlled for in the regressions,the variable ‘male’
attracts a significant negative coefficient for each of the measures of
satisfaction examined? This is surprising for two reasons. First, it is well
established that there is sex discriminationin the British labour market (see,
among others, Brown Johnson et al. 1992;Equal Opportunities Commission
1992; and Wright and Ermisch 1991). Second, when life satisfaction/
subjective well-being scores are analysed, women report higher levels of
stress than do men (see Clark and Oswald 1994;h e 1991).
There are a number of plausible explanations for this finding. First, men
and women workers differ both in terms of the types of jobs that they do and
in terms of their personal characteristics (for example, working men have
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 Job Satisfaction in Britain 197
rather different qualificationsfrom working women and work longer hours).
Second, from the responses to the BHPS question on the aspects of a job
that the respondent fmds important, it is apparent that men and women
value work for different reasons." Third, there is a participation effect: for
cultural reasons, women who are dissatisfied at work may find it easier to
leave the labour force than their male equivalents; thus, satisfied women
workers may be a statistical construct, as more of the women who would be
dissatisfied at work are not working. Last, men and women may answer job
satisfaction questions in different ways because, although their objective job
characteristicsmay be the same, their expectations of what their job should
be like, or the reference groups against which they compare, are different.
The first two explanations, controlling for individual and job character-
istics and work values, are tested in the Ordered Probit regressions in
Appendix B. As can be seen, the estimated coefficient on males remains
negative and significant for all three measures of job satisfaction. The
remaining hypotheses are discussed in Clark (1995b).The formal testing of a
selection effect is complicated in an Ordered Probit model, but the
preliminary results do suggest that the selection effect helps to explain
women workers' higher job satisfaction. The last explanation proposes that
men's and women's responses to job satisfaction questions may differ
because they use different expectations or reference groups to evaluate their
jobs. For example, if it is true that women are socialized into expecting less
from their employment, then they will be more satisfied than a man with any
given job. It is not easy to test for such an effect, as most surveys contain no
information about individual expectations or reference groups. (The data
analysed by Melenberg (1992) are an exception.) The inclusion of measures
of comparison income into job satisfaction regressions using the BHPS data
set (Clark 1995a, c; and Clark and Oswald 19%) does not explain the lower
levels of job satisfaction reported by male workers. However, Clark (1995b)
finds that younger women, professional women and higher-educated
women report the same, or lower, levels of job satisfaction as their male
counterparts, which is consistent with cohort, experience and education
effects on women's expectations regarding their jobs."

Age
A significant relationship between job satisfaction and age is apparent in
Table 2's cross-tabulations. Satisfaction with pay and satisfaction with the
work itself rise nonlinearly with age, with larger rises in satisfaction for the
older age groups. There is some evidence of a U-shaped relationship
between overall job satisfaction and age, with those in their twenties or
thirties being the least satisfied. For all three measures, workers aged sixty
or over are the most satisfied,followed by workers in their fifties.
When other variables are controlled for in the regressions, a slightly
different picture emerges. Here, both age and its square are entered as
explanatory variables to reflect the nonlinear relationship suggested by the
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198 British Journal of Industrial Relations
cross-tabulations. The significant negative coefficient on age and the
positive coefficient on age-squared in all three regressions imply a U-shaped
relationship between age and job satisfaction. The minima of these U-
shapes are at ages 36, 27 and 34 respectively for satisfaction with pay,
satisfaction with the work itself and overall job satisfaction.The relationship
between job satisfaction and age in the BHPS data set has been explored by
Clark et al. (1996), who find that explanations based on matching, whereby
older people have had more time in the labour force to find a good job, and
on a cohort effect, whereby workers born in the 1950s have always had low
satisfaction, are not supported by the data.
Older workers’ higher levels of job satisfaction could result from a
participation effect, as for the gender difference in job satisfaction discussed
above. The idea that dissatisfied older workers find it easier to leave the
labour market is a natural one. However, early retirement probably starts to
become numerically important only in the fifties and sixties, whereas
satisfaction starts to rise in the thirties. The participation effect probably
helps to explain why workers over the age of fifty have such high levels of job
satisfaction, but does not provide an underpinning for the whole of the U-
shaped relationship.
The conclusion proffered by Clark et al. (1996) is in terms of workers’
perceptions of their job in relation to their job expectations. The U-shape
may be explained not by individual or job characteristics, but by changing
expectations over time. Young workers may feel satisfied because of the
novelty of their situation and because they have little information about the
world of work with which to evaluate their job. As they become older they
become able to make this comparison, and it may be that this explains the
drop in satisfaction towards the mid-thirties. The subsequent rise in
satisfaction up until the age of retirement probably partly results from the
participation effect discussed above; it could also come from older workers’
reduced aspirations as they realize that they have fewer alternative jobs
open to them, or even from the reduced importance that older workers
might attach to such aspirations.”

Health
There is a strongly significant positive relationship between self-reported
physical health and job satisfaction in Table2. This could reflect that
workers in poor health have a tendency to report low levels of satisfaction
with all aspects of their life, or that they can only obtain relatively
unsatisfying jobs. As the introduction of the job description variables
(hours, income, promotion opportunities, managerial responsibilities and
so on) in the regressions does not remove the health effect, it seems likely
that it is the propensity of those in poor health to be less satisfied that is
driving this correlation.

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 Job Satisfaction in Britain 199

Education
The effect of education on labour market behaviour has been heavily
researched. The results show that those with higher levels of education earn
more (see e.g. Blanchflower and Oswald 1994), are promoted more quickly
and, in general, end up with better jobs. In light of these findings, the
predicted correlation between education and job satisfaction should be
unambiguously po~itive.’~ Table 2’s results do indeed indicate that there is a
strong relationship between job satisfaction and education, but of the
opposite sign. For all three measures of job satisfaction, the percentage of
those claiming to be very satisfied is greatest for the group with the lowest
level of education. There is weak evidence that mean satisfaction with pay
increaseswith education,but those with the highest level of education report
mean overall job satisfaction of 5.38, against a figure of 5.44 for those with
intermediate education and 5.67 for those in the lowest educational group.
When other explanatory variables are included, higher levels of education
are unambiguously associated with lower levels of all three measures of job
satisfaction.
One interpretation of these results is presented in Clark and Oswald
(1996), where it is suggested that, even though better educated workers have
better jobs, education is positively correlated with workers’ expectations of
what kind of job they should have. The causal mechanism of this
relationship is ambiguous: the process of education could itself raise
workers’ expectations, or those who already have high expectations
(influenced by their parents or their early schooling, for example) could be
more likely to continue their education. The expected correlation between
education and job satisfaction becomes ambiguous once such comparisons
are taken into consideration. The statistical results discussed above show
that the ‘comparison’-level effect associated with education seems to
outweigh the positive effect through the type of jobs that better educated
workers have; thus, workers with higher levels of education report
themselves as relatively dissatisfied.

Race
The cross-tabulation results show that whites report the highest level of
overall job satisfaction and that blacks appear to be relatively dissatisfied
with their pay.14 In the regressions, the only significant racial effect is that
workers from the Indian sub-continent are more likely to be satisfied with
their work itself. The scarcity of significant results here is partly due to the
relatively small number of ethnic minority workers interviewed (68 black
and 71 Indian sub-continent workers).

Marital Status
Marital status is strongly correlated with overall job satisfaction and
0 Blackwell PublishersLtdRandon School of Economics 1996.
200 British Journal of Industrial Relations
satisfaction with the work itself, both in the cross-tabulations and in the
regression equation. Married workers report the highest level of overall job
satisfaction, but the most satisfied group with respect to the work itself are
the widowed. This latter correlation is of note because widow(er)hood is
probably the only marital status involving no personal choice, and thus can
be considered as completely exogenous to the individ~al.’~ Those who are
widowed may value more highly the social contacts that work brings, which
is consistent with the large and significant coefficient on widow(er)hood
appearing in the satisfaction with the work itself equation.

Housing Tenure
Renters are more satisfied at work than home owners or home buyers. This
could reflect ease of mobility between jobs. Individuals cannot always, for a
variety of reasons, change from one job to another, even if they would find
such a change satisfying; house ownership or purchase could represent an
obstacle to geographic job mobility, whereas renters are presumably more
mobile, and thus more able to leave unsatisfying jobs. Alternatively, if
renting is seen as a proxy for social class, and thus for the individual’s
reference group, renters could make comparisons against a reference group
with worse jobs, and thus report higher levels of job satisfaction.

Region
Workers in London, especially inner London, are relatively dissatisfied with
their jobs. This effect is most pronounced for satisfaction with pay. The
estimates from the overall job satisfaction equation imply that, ceteris
paribus, the most satisfied workers are found in the ‘rest of the North’ and
the least satisfied are found in inner London and Scotland. Overall there is
little evidence of a North-South divide in job satisfaction.
One potential explanation is that satisfaction is lower when the price level
in the region is higher. To test this hypothesis, the regional dummies were
replaced by a regional price variable. Regional prices were insignificant in
the overall job satisfaction equation but were negative bordering on
significance (at the 7% level) in the satisfaction with the work itself
equation, and negative and significant at the 0.1% level in the pay
satisfaction equation. However, examination of the log-likelihoodsfrom the
two specifications reveals that the regional dummies fit the data better than
does the regional price variable. The results thus offer some support for the
hypothesis that job satisfaction is lower in high price regions, but there
appear to be other, unmeasured, regional characteristics which contribute
to workers’ reported levels of job satisfaction.

Work Values
All respondents who were active in the labour force were asked to choose
their first most important aspect of a job from a list of seven specific job
0 Blackwell Publishers LtdlLondon School of Economks 1996.
 Job Satisfaction in Britain 201
attributes, the same as those highlighted for the job satisfaction questions
above, and an eighth catch-all category, ‘something else’. For the regression
analysis this last category and ‘initiative’ are excluded, leaving six dummy
variables. These turn out to be very strong predictors of job satisfaction. The
regression results show that workers who say that promotion opportunities
or pay is the most important aspect of a job report substantially lower levels
of job satisfaction. The estimated effects are large: choosing pay as the most
important aspect of a job has a comparable negative effect on job
satisfaction to being male in two out of the three regressions. On the other
hand, there is some evidence that those who choose hours of work or
relations at work report higher levels of satisfaction.

Income and Hours

The cross-tabulation results do not provide strong evidence for the
hypothesis that high pay is associated with higher levels of job satisfaction.
Although the highest paid group report the highest mean level of pay
satisfaction, for the other two measures it is the lowest paid who have the
highest satisfaction. Once other variables are controlled for in the regres-
sions, income is strongly positively correlated with satisfaction with pay,
exhibits a weaker positive correlation with overall job satisfaction, and is
uncorrelated with satisfaction with the work itself>6
It may be surprising that pay has a relatively weak effect on overall job
satisfaction. It is possible that this result stems from the unobservability of
some variables which are correlated with both income and satisfaction. If
one of the functions of pay is to compensate workers for the difficultyof their
job, then higher-paid workers may be doing harder jobs, and therefore will
not necessarily be more satisfied.”
An alternative explanation relies on the idea that income is evaluated
relative to some comparison level and not in an absolute sense, as discussed
in Section 2. Absolute income may then act as a poor measure of relative
income, which would explain its relative weakness in predicting overall job
satisfaction. Previous work using the BHPS data set has found strong
correlations between job satisfaction and comparison income, this latter
being measured by an econometrically predicted ‘going rate’ for the job
(Clark and Oswald 1996), the pay of other workers in the same household
(Clark 1995a) or the pay that the respondent has received in the past (Clark
199%). These comparison income measures are shown to be negatively
correlated with overall job satisfaction, suggesting that the income compar-
isons are important determinants of workers’ reported well-being.18Weekly
hours of work are very strongly negatively correlated with satisfaction with
pay and, less strongly, with overall job satisfaction.

Industry and Occupation

In general, workers are relatively satisfied in agriculture and dissatisfied in
engineering. Workers in ‘other services’report low levels of satisfactionwith
8 Blackwell Publishers Ltd/London School of Economia 19%.
202 British Journal of Industrial Relations
pay but are one of the most satisfied groups overall. A compensating
differentials interpretation is that workers in 'other services' are being paid
badly because there are other (unobserved, in this data set) aspects of their
jobs that make them satisfied. Those at the higher end of the occupational
scale, professionals and managers, report higher satisfaction with their work
itself but are relatively dissatisfied with their pay. The same pattern holds for
craft and sales workers. Personal sector workers are the most satisfied
overall according to the regression estimates, and plant operatives are the
least satisfied.

Establishment Size
The most satisfied workers are to be found at smaller establishments (see
Idson 1990).19 This effect is weaker for satisfaction with pay because we
know that larger firms (to which larger establishments must belong) pay
higher wages (see Brown and Medoff 1989). The effect of establishment size
is strongest for satisfaction with the work itself.
A stratification approach was adopted to test the hypothesis that this
establishment size effect is weaker for those who value the pay and
promotion opportunities that larger, more hierarchical, establishments
provide. Separate regression equations were estimated for those who
considered pay, promotion or hours (extrinsic characteristics of the job) as
the most important aspect of working, and for those who chose relations at
work or the work itself (intrinsic characteristics of the job). The establish-
ment size dummies were insignificant for the former group, but (except for
satisfaction with pay) very significant for the latter. This suggests that part of
the attraction of small establishments comes from their provision of intrinsic
rewards, which raise significantly the job satisfaction of those workers who
value such job characteristics.*'

Union Membership
A negative correlation is found between union membership and all three
measures of job satisfaction;this relationship has been one of the main points
of interest of the small extant empirical job satisfaction literature (Borjas
1979; Freeman 1978; Meng 1990; and Miller 1990). There is an obvious
issue of endogeneity here, since,if unions address issues of worker dissatisfac-
tion, the more dissatisfied workers will be the most attracted by union
membership. Another potential explanation relies on the fact that unions, by
providingworkers with a voice (seeFreeman 1980),encourage them to stay in
jobs they dislike and to try to change their working conditions?'

Incentive Payments, Promotion Opportunities and Managerial

Responsibilities
First, the BHPS data set includes information on whether the employee's
pay ever includes incentive bonuses or profit-related pay. In Table 2, such
0 Blackwell Publishers L t a n d o n School of Economics 195'6.
 Job Satisfaction in Britain 203
incentive payments are associated with higher pay satisfaction but lower
levels for the other two satisfaction measures. However, when the other
variables are controlled for in the regressions, there is no significant effect of
incentive payment systems on any of the measures of satisfaction considered
and so no estimates are reported. This finding is consistent with that of
Marsden and Richardson (1994), who argue that the role of these
compensation systems in bringing about employee satisfaction does not
appear promising.
Variables measuring the worker’s position, or potential position, in the
firm’s hierarchy are strong predictors of job satisfaction. The availability of
opportunities for promotion has a positive effect on all three measures of job
satisfaction: the increase in overall job satisfaction for having promotion
opportunities outweighs the lower satisfaction associated with working in
the largest (200 workers or more) establishment or being a union member.
Managerial responsibilities are strongly positively correlated with satisfac-
tion with the work itself, but show no relationship with the other two
satisfaction measures.

Temporary or Contract Work

The flexibility of the work-force has been a much-discussed topic in
industrial relations since the mid-1980s (see eAg.Hunter et al. 1993). One
aspect of this flexibility has been the growth in the number of workers on
temporary or fixed-term contracts, a change that has sometimes been
suggested not to be in the workers’ interests. However, no effect of such
status on workers’ job satisfaction is found the cross-tabulations in Table 2
show that temporary or contract workers report levels of job satisfaction
similar to those of workers on permanent contracts. Further, the variable
for temporary or contract work was insignificant in all three regression
equations.=

Second Job
The image of the worker with a second job is not that of someone who is
necessarily satisfiedwith the world of work. Table 2 shows that workers with
a second job do indeed report lower levels of job satisfaction, but only
significantly so for pay satisfaction. The second job variable is insignificant
for all three measures of job satisfaction once the other explanatory
variables are controlled for in Appendix B.

5. Predictedjob satisfaction

The results of the regressions reported in AppendixB may be used to

predict the probabilities with which workers with certain types of character-
0 Blackwell Publishers Ltd/London School of Economics 1996.
204 British Journal of Industrial Relations
istics will report different levels of job satisfaction. As an illustration,
Table 3 presents the estimated probabilities that four ‘benchmark’ individ-
uals will report job satisfaction of 7, the highest level, or of 6 or 7 (and are
thus ‘highly satisfied’ according to the definition used in Table 2). A brief
description of each individual is given in the table; the full details are
provided at the foot of Appendix A.

TABLE 3
Estimated Percentage Probabilitiesof ReportingHigh Job Satisfaction

Satisfaction Satisfaction Overall job

with pay with work satisfaction
itself

7 6or7 7 6or7 7 6or7

~~

1. Female, 25, single,f1300 pcm, 27.3 44.1 35.7 59.8 28.7 58.1
40 hours pw, education high
2. Male, 35,married,f2000 pcm, 22.7 38.5 52.7 75.3 26.9 55.9
45 hours pw, education high
3. Female, 45, married, f 1600 pcm, 30.6 47.9 44.6 68.4 32.5 62.2
35 hours pw, education medium
4. Male, 55, divorced, f 1300pcm, 18.1 32.5 40.9 65.0 14.3 38.1
38 hours pw. education low.

Table 3 shows that all four individuals are estimated to be more likely to
report high satisfaction with work itself than high satisfaction with pay or
high overall job satisfaction, as Table 1 suggests. The third individual
typically has the highest predicted probability of the four of reporting high
levels of job satisfaction, as she combines a number of favourable
characteristics.
Marginal effects on these estimated probabilities can be calculated by
changing the characteristics of one of the individuals, say individual 3. All of
the following figures apply to overall job satisfaction. A change of gender
from woman to man reduces the estimated probability of responding 7 from
33% to 24%; a high level of education reduces this probability to 28%, and
an increase in weekly hours from 35 to 45 has only a small effect, cutting the
probability to 30%. On the other hand, a widow with the same character-
istics as individual 3 is estimated to have a 37% probability of reporting
overall job satisfaction of 7, while increasing individual 3’s age from 45 to 60
increases this probability from 33% to 46%, and that of being highly satisfied
from 62% to 74%.

6. Compensating differentialsand wage rents

A lively literature has developed recently concerning the existence of

compensating differentials in the labour market: are workers paid more to
8 Blackwell Publishers Ltd/London School of Economics 1996.
 Job Satisfaction in Britain 205
undertake jobs with certain unpleasant characteristics, and if so how
much? One specific facet of this research has examined the extra pay that
would compensate workers for supplying one more hour of labour, in other
words the shadow wage rate. The shadow wage, which is essential for an
understanding of labour supply and the structure of pay, has typically been
estimated with wages and hours variables from cross-section or panel data.
This paper proposes an alternative methodology whereby we consider
changes in wages and hours that leave a worker’s job satisfaction un-
altered.
A related area of research has looked at the inter-industry and, to a
lesser extent, inter-occupational structure of wages. It is often observed
that the standard set of explanatory variables cannot adequately explain
wages, in that industry or occupational dummies remain significant in the
estimated wage equation. One interpretation of this finding is that these
dummies represent compensating differentials, i.e. unmeasured aspects of
the job or worker which differ across industries and occupations and for
which workers are compensated. This paper performs a simple test of this
supposition using the estimated job satisfaction equations. The results
suggest that inter-industry and inter-occupational wage differentials are
positively associated with job satisfaction differentials, and thus may well
represent rents to workers, rather than compensating workers for the type
of job that they do.

Shadow Wages
The regression results can be used to estimate the shadow wage in an
obvious way: if an individual works one more hour, how much would his/
her pay need to rise to leave hidher job satisfaction unaltered? Ideally
this calculation would be performed on overall job satisfaction, but the
weakness of the correlations between pay and overall job satisfaction,
especially in the sub-sample who do not wish to change their hours of
work (analysed below), precludes its use in estimating the shadow wage.
However, both hours and pay are strongly associated with pay satisfac-
tion, and it is the results from this regression that provide the estimates
below.u
One problem that has dogged many previous estimates of the shadow
wage can be resolved thanks to the richness of the BHPS data set. The
calculation of the shadow wage requires that workers be on their labour
supply curve. However, the discreteness of the wage and hours distribution
that firms offer implies that this condition often does not hold. All BHPS
working respondents are asked if, given their current hourly wage, they
would prefer to change their weekly hours of work 30% of workers said that
they would prefer to work fewer hours, and 9% would prefer to work longer
hours. The shadow wage calculations reported below use data from the
remaining 61% of the sample.
For this sub-sample, an increase of one hour of work per week (from the
0 Blackwell Publishers Ltd/London School of Economics 19%.
206 British Journal of Industrial Relations
mean level of 29 hours per week) can be compensated by a rise in gross
monthly income of f37, giving a shadow wage rate of €8.60 per hour (ph)
compared with this sub-sample’s actual average hourly earnings of f5.40 per
h o ~ r . The
2 ~ same regression with income and hours interactions by gender
reveal that men’s estimated shadow wage (f 10 ph; actual average earnings
f6.40 ph) is higher than that for women (f6.75 ph; actual average earnings
f4.60 ph). Interactions by level of education produce estimates off 11ph for
the higher-educated group, f7.50 ph for workers with a medium level of
education and f6.50 ph for workers with the lowest level of education
(compared with their actual average earnings of S7.60, f5 and f4.20ph
respectively).25

Rents in Industry and Occupational Wages

Most studies of the wage structure have found that workers in some
industries or occupations systematically earn more than their individual and
job characteristics would predict (see Gibbons and Katz 1992; and Hwang ef
al. 1992). The consequent discussion has focused on whether these wage
differentials are compensating,reflecting unmeasured aspects of the worker
and the job, or non-compensating, in which case they are referred to as
rents. This section uses the results from job satisfaction and pay regressions
to present some preliminary evidence that these wage differentials are non-
compensating.
To aid intuition, consider a wage equation that regresses log income (y)on
a series of individual and job characteristics, the latter including a set of
,
industry dummies, I, (the subscript indicating that these dummies are in
the wage equation). The estimation of the wage equation yields estimates
R,,, for these industry dummies. The explanatory variables also include a set
of occupation dummies, 0,, with analogous estimated coefficients R0,,. The
estimated coefficients on these industry and occupation dummies represent
the part of wages that cannot be explained by other explanatory variables,
but which varies systematically by industry and occupation. Similarly, the
estimation of a job satisfaction equation yields estimates of ,R and B, for
the industry and occupation dummies respectively. If wage differentials are
non-compensating, then higher wages should be reflected in higher worker
job satisfaction; that is, there should be a positive correlation between R,,,
and and between R0,, and.,R On the other hand, if wage differ-
entials are compensating, there should be no such relationship. As we are
interested in whether different levels of wages by industry bring about job
satisfaction, wages are not controlled for in these satisfaction regressions.
(To do so would evaluate job satisfaction at the same wage.)
This test was camed out using the BHPS data. Both the wage equation
and the job satisfaction equation contained a rich array of explanatory
variables.% The relationship between the industry coefficients in the two
regressions was analysed by the regression of one set of industry estimates
on the other: B,,js = a + yB,,,. The same technique was used for the
8 Blackwell Publishers Ltd/LondonSchool of Economics 1996.
 Job Satisfaction in Britain 207
analysis of the relation between the occupation dummy estimates. Indus-
try and occupation were defined at the two-digit SIC and SOC level
respectively, giving 58 observations by industry and 75 by occupation.
These observations were then weighted by the number of respondents in
each two-digit group. The resulting estimates of y, with t-statistics in
parentheses, are presented in Table 4. The estimates of y are positive and
significant in every case (bar the industry estimate for satisfaction with
work itself): industries and occupations that ‘inexplicably’ pay more also
have workers who are ‘inexplicably’ more satisfied with their jobs. This
result is consistent with the hypothesis that inter-industry and
inter-occupational wage differentials are not compensating differentials.
However, the causality of this correlation is not clear, and it could be
the case that more satisfied individuals make better workers and are
rewarded accordingly, which need not imply the existence of wage
rents. The definitive test between these two hypotheses would require
either much better information on worker productivity than is typically
available, or the analysis of panel data. In the latter case, a good
worker who is satisfied should be well rewarded even if she changes
industry or occupation: panel data thus distinguishes between explana-
tions that are worker-based and those that are industry- or occupation-
based.n
TABLE 4
Wage Rents and Job SatisfactionRents:Estimates of y

Satisfaction Satisfaction Overall

withpay with Work Satisfmtion
Itself

By industry 1.56 (33.0) 0.03 (0.9) 0.35 (8.3)

By occupation 0.33 (16.0) 0.61 (29.2) 0.15 (7.1)

7. Condusion

This paper has provided an up-to-date empirical analysis of job satisfaction

in Britain. The satisfaction levels of some 5000 workers have been related to
a wide range of their personal and job characteristics. The results have
shown that job satisfaction is higher for women, older workers, and those
with lower levels of education. It has been argued that this finding may be
explained both by the different levels of labour force participation and job
expectationsand by comparisonsby sex, age and education. The types of job
that workers have are also strong predictors of job satisfaction. Workers
with long hours, those in large establishments, union members and those
without promotion opportunities are more likely to be dissatisfied at work.
Income is strongly positively correlated with pay satisfaction and much less
strongly with overall job satisfaction.
0 Blackwell PublishersLtdRnndon School of Economics 1996.
208 British Journal of Industrial Relations
In addition, this paper has suggested that the use of data on workers’
subjective evaluations of their job may give new insights into a number of
active areas of labour market research. Compensating differentials can be
calculated as the extra income that would compensate a worker, i.e. leave
him just as satisfied, for dissatisfying aspects of his job. The average worker
would need to receive an estimated extra $8.60 to compensate for an extra
hour of work. This shadow wage is higher for men and for those with higher
levels of education. A growing literature has considered whether inter-
industry or inter-occupational wage differentials are compensating or
whether they represent rents to workers. A positive relationship was found
between the estimates on industry/occupation dummies in a wage equation
and their counterparts in a job satisfaction equation: industries/occupations
that pay more than expected have workers who are more satisfied than
expected. This finding is consistent with the interpretation of these inter-
industry and inter-occupationalwage differentials as rents.

Appendix A

Variablesand definitions
Overall job satisfaction: Scaled 1-7 where 7 is the highest category.
Job satisfaction with pay: Scaled 1-7 where 7 is the highest category.
Job satisfaction with the work itself: Scaled 1-7 where 7 is the highest
category.
Male dummy: Respondent is male.
Age: Age of respondent at date of interview.
Health dummies (3): Respondents classify their own health, compared
with people of their own age. Categories: Excellent; Good; Fair to very
poor. Omitted category: fair to very poor,
Education dummies (3): High - degree, teaching qualification or other
higher qualification; Medium - nursing qualification, A-levels, 0-levels
or equivalent;Low -neither of the above. Omitted category: Low.
Indian dummy: Respondent considers that they below to the Indian,
Pakistani or Bangladeshi racial group.
Black dummy: Respondent considers that they belong to the black
Caribbean, black African or other black racial group.
Marital status dummies (5): Married; Separated; Divorced Widowed:
Never Married. Omitted category: Never Married.
Renter dummy: Respondent lives in rented or rent-free accommodation.
Region dummies (18): Standard regions plus seven metropolitan areas.
Work values dummies (7): Aspect of a job which respondent finds most
important: Promotion prospects; Pay; Relations at work; Job security;
The actual work itself; Hours; and Using your initiative or ‘something
else’. Omitted category: Using your initiative or something else.
Log income: Natural log of usual monthly gross pay from respondent’s
main job.
0 Blackwell Publishers L t m n d o n School of Economics 1996.
 Job Satisfaction in Britain 209
Log hours: Natural log of usual weekly hours (excluding overtime).
Industry dummies (10): Agriculture, forestry and fishing; Energy and
water supplies; Extraction of minerals and ores other than fuels,
manufacture of metals, mineral products and chemicals; Metal goods,
engineering and vehicles industries; Other manufacturing industries;
Construction; Distribution, hotels and catering; Transport and com-
munication; Banking, finance, insurance, business services and leasing;
Other services. Omitted category: Other services.
Occupation dummies (9): Managers and administrators; Professional;
Associate professional and technical, Clerical and secretarial; Craft and
related; Personal and protective service; Sales; Plant and machine
operative; Other. Omitted category: Other.
Establishment size dummies (3): Number of workers at establishment is
<25; 25-199; 200+. Omitted category: 200+.
Union member dummy: Respondent is a member of a recognized union
at hidher workplace.
Incentive payments dummy: Respondent’s pay has included incentive
bonuses or a profit-related element.
Promotion opportunities dummy: Respondent has opportunities for pro-
motion in hidher current job.
Manager dummy: Respondent has some managerial or supervisory
duties.
Temporary or contract work dummy: Respondent’s current job is sea-
sonal, temporary, casual or a job done under contract or for a fixed
period of time.
Second job dummy: Respondent earns money from a second job.

Characteristics used for the predictions in Section 5

In addition to the characteristics described in the text, the following at-
tributes were used to calculate the predicted probabilities. All individuals
are home owners.
Individual 1: health excellent; white; West Yorkshire; pay most impor-
tant; Other Services; Clerical, establishment size 25-199; non-union;
promotion opportunities; manager.
Individual 2: Health good, black; West Midlands conurbation; work
itself most important; Construction; Manager; establishment size 200+;
non-union; promotion opportunities;manager.
Individual 3 health good, white; Inner London; job security most
important; Other manufacturing; Personal; establishment size 25-199;
non-union; promotion opportunities;manager.
Individual 4: health other; white; Scotland; ‘something else’ most
important; Transport; Plant operative; establishment size 1-25; union;
no promotion opportunities; not a manager.

8 Blachuell Publishers LtdlLondon School of Economics 19%.

210 British Journal of Industrial Relations
Appendix B
Table B1 lists the Ordered Probit job satisfactionregressions

TABLE B1
Ordered Probit Job SatisfactionRegressions
~~ ~~

Satisfaction Satisfaction Overall job

with pay with work satisfaction
itself

Individual characteristics
Male -0.29** -0.18** -0.26**
(0.04) (0.04) (0.04)
Age -0.050** -O.M4* -0.043**
(0.009 (0.010) (0.010)
Age-squared1000 0.69** 0.47** 0.62**
(0.11) (0.12) (0.12)
Health
Excellent O.22** 0.27** 0.40**
(0.05) (0.05) (0.05)
Good 0.15** 0.10* 0.18**
(0.04) (0.04) (0.04)
Education
Higher -0.12* -0.34** -0.32**
(0.05) (0.05) (0.06)
A/o/Nursing -0.10* -0.19** -0.21"
(0.04) (0.W (0.04)
Race
Black 0.08
(0.15)
Indian 0.35*
(0.14)
Marital status
Married 0.06 0.14**
(0.05) (0.05)
Separated -0.12 0.03
(0.12) (0.13)
Divorced 0.05 0.04
(0.08) (0.08)
Widowed 0.44** 0.27
(0.16) (0.15)
Renter 0.09' 0.15**
(0.04) (0.04)
Region dummies (18) Yes** Yes* Yes*
Work values
Promotion -0.30** -0.22; -0.22*
(0.11) (0.10) (0.11)
Pay -0.17** -0.29** -0.29**
(0.07) (0.06) (0.07)
Relations at work 0.06 0.12 0.20*
(0.08) (0.08) (0.08)
Job security 0.002 -0.004 0.10
(0.06) (0.06) (0.06)
Actual work itself -0.04 0.05 -0.01
(0.06) (0.06) (0.06)
Hours 0.20 0.05 0.11
(0.10) (0.10) (0.11)

0 Blackwell Publishers Ltd/London School of Economics 1996.

 Job Satisfaction in Britain 211
Job characteristics
Log income 0.60** 0.09*
(0.04) (0.04)
Log hours -0.89.. -0.25*
(0.06) (0.06)
Industry dummies (10) Yes* Yes** Yes**
Occupationdummies (9) Yes** Yes** Yes*
Establishmentsize: 1-24 0.28** 0.21**
(0.04) (0.05)
Establishmentsize: 25-199 0.08* 0.07
(0.04) (0.04)
-0.10** -0.10** -0.13..
(0.04) (0.04) (0.04)
0.17** 0.10** 0.24**
(0.04) (0.04) (0.04)
0.12**
(0.04)
-1.29 -1.75 -2.73
-1.07 -1.59 -2.51
-0.70 -1.30 -2.15
-0.12 -0.67 -1.57
0.36 -0.20 -0.98
0.81 0.42 -0.22
4299 4798 4277
-7783.2 -7098.7 -6653.2
-8050.5 -7406.3 -6951.9

Nores: * denotes signi6cance at the 5% level and ** significance at the 1% level. Standard
errors in parentheses.

Final version accepted 8 March 1995.

Acknowledgements
This paper refers in part to joint work with Andrew Oswald and Peter Warr.
I am grateful to them both for their enthusiasm and insights. I also thank
Peter Dolton, David Gray, Dan Hamermesh, John Treble, Ruut Veen-
hoven, Frances Woolley and two anonymousreferees for helpful comments.
The data used in this paper were made available through ESRC Data
Archive. The data were originally collected by the ESRC Research Centre
on Micro-social Change at the University of Essex. Neither the original
collectors of the data nor the Archive bear any responsibilityfor the analyses
or interpretations presented here. Part of this research was carried out at
CEPREMAP, Paris, and DELTA, Paris, whose hospitality is gratefully
acknowledged. This work was supported by the European Union. The views
expressed in this article are those of the author and do not represent those of
the OECD or of its member countries.

Notes
1. Lmke (1976) notes that a 1957 survey included 1795 references to papers on job
satisfaction, and estimates that the corresponding1976 figure was over 3350.
0 Blackwell PublishersLtd/London School of Economics 1996.
212 British Journal of Industrial Relations
2. Locke examines in detail Maslow’s need hierarchy theory and Herzberg’s
Motivator-Hygiene theory.
3. This distinction between behaviour and job satisfaction diminishes in light of the
research showing links between job satisfaction and labour market behaviour.
Hodson’s point that workplace setting and the worker’s reaction to it are
important is a good one, but it is not clear how his resulting classification of
worker types could be implemented empirically.
4. The 1973GHS report showed that those who were very dissatisfiedwith their job
were thirteen times more likely to report an intention to quit than those who
were very satisfied.
5. Recent methodological defences of the analysis of subjective variables have
been made by Harsanyi (1986), Tinbergen (1991) and Van Praag (1991).
6. This claim can be confirmed by factor analysis.
7. Data from the 1989 British Social Attitudes survey, the General Household
Surveys, the 1989 ISSP, which holds comparable individual-level labour market
data for 11countries, and the US General Social Surveys show similar bunching.
8. Positive coefficients in the Ordered Probit regressions are associated with a
higher estimated probability that the individual reports job satisfaction of
greater than level i (see Greene 1993). The Ordered Probit procedure chooses
estimates b to maximize Zln(p,), where pi is the estimated probability of the
observed response and the summation is over all of the observations in the data
set. The probability of observing level i is pi = R(pi-l c x‘b+u 5 pi), where u
is assumed to be normally distributed. The b coefficients are estimated by the
procedure, as are the thresholds, pl, h, . . ., P,-~, where I is the number of
categories of the ordered dependent variable. is taken to be --OD and p,+=;
the probabilities thus sum to 1. Say that an individualj has characteristics 4 such
that T’b = -0.7: then the estimated probability that j reports overall job
satisfaction of 7, using the estimates of the p’s from Appendix 2, is Pr(-0.22 <
-0.7+u I+ m) = Pr(0.48 < u) = 1-F(0.48) = 31.6% (where F is the cumula-
tive normal distribution). Similarly, the estimated probability that j responds
‘6’ is Pr(-0.98 < -0.7+u 5 -0.22) = 1-F(-0.28) - (1-F(0.48)) = F(0.48)-F
(-0.28) = 29.4%. The estimated probability that j responds ‘1’ is F(-2.03) =
2.1%.
9. Analogous US results are found in Blanchflower et al. (1993).
10. For example, 34% of female employees say that the most important aspect of
working is the actual work itself, as opposed to 24% of male employees; for pay
these figures are 13% and 19% respectively.
11. The results of separate job satisfaction regressions by gender are presented in
Clark (1995b).
12. The psychological theory of cognitive dissonance implies that workers who have
made a career choice will ignore information which implies that they have
chosen badly (see Akerlof and Dickens 1982). Higher satisfaction could also
result from the lowering of the desired or expected level of job rewards. The
rising part of the age-job satisfaction profile could thus be explained either by
the progressive discarding of dissatisfyingcomparisons with age, as the choice of
career becomes increasingly lixed, or by the progressive diminution of desires
with age (resignation to the job that one has).
13. This proposition rules out the scenario of perfect information and no financial
constraints in which schooling is chosen optimally, which implies no correlation
between education and job satisfaction.

8 Blackwell Publishers LWLondon School of EMnomics 1996.

 Job Satisfaction in Britain 213
14. BlancMower et al. (1993) and Freeman (1978) find that blacks have lower levels
of job satisfaction than whites, although Bartel (1981) finds the opposite
correlation.
15. Marriage is, however, endogenous. Veenhoven (1989) emphasizes that ‘hap
pier’ individualshave a better chance in the marriage market.
16. Since the log transformation forces concavity, it might be an inappropriate
functional form in light of the cross-tabulation results. Experiments with the
level of monthly gross pay and its square, as well as with the log of pay and
the square of the log, proved unsuccessful. However, these additional es-
timates conlimed the strong positive relationship between monthly pay and
satisfaction with pay, and the weaker relationship with overall job satisfac-
tion. None of the results were changed by the use of net (as opposed to gross)
monthly pay.
17. Mortimer et al. (1988) show that job satisfaction rises with the autonomy of the
job, and Miller (1980) shows that job satisfaction is negatively correlated with
a number of job pressures (such as time pressure or diitiness). These types of
variables,unmeasured in the data set, could be compensated by higher pay.
18. If reference groups are occupation-based,then separate regressions by occupa-
tion will hold y* constant and allow less-biasedestimatesof y. The results yielded
two occupation groups, Craft and Related and sales, for which the estimated
income coefficient,despite the much smaller sample size, was better-determined
than that from the equation in AppendixB. A similar exercise by industry
revealed strong positive income coefficients in Other manufacturing (SICII) and
Construction (SICS). There is thus some evidence consistent with the existence
of occupation- or industry-based reference groups, but only for a minority of
workers in the sample.
19. This relationshipis consistent with the positive correlation between firm size and
sickness absenteeism reported by the CBI (1994): the lowest rate of absenteeism
(2.3%) was found in firms with fewer than 100 employees,while the highest rate
(4.3%) was in firms with more than 5000 employees.
20. It might be countered that part of the attraction of smaller establishmentsis their
likely proximity to the worker’s home. However, a variable measuring
travel-to-work time was insignificant in all of these regressions and did not affect
the conclusions.
21. Rebitzer and Tsuru (1993) note that 22% of male union members would not tell
anyone about their dissatisfaction with wages, as opposed to 33% of non-union
workers.
22. Gender interactions showed that temporary or contract work has a greater
negative effect on women’s job satisfaction than on men’s; however, none of the
estimates were statistically significant.
23. The true measurement of shadow wages requires information about changes in
the worker’s welfare level. However, an estimated job satisfaction relationship
is a reduced form which reflects both workers’ and firms’ behaviour. The
presence of a number of firm controls in these equationsis designed to keep firm
characteristics as constant as possible, and hence to enable us to identify the
worker’s evaluationof income and hours changes.
24. The estimated coefficient on log hours for this sub-sample is -0.8767, and that
on log income is 0.5257. A rise of one hour of work per week from the mean of
29.3 thus has a negative effect on the (latent) dependent variable of
-0.8767(ln(30.3)-ln(29.3)) = -0.0294. A rise in monthly income of f37.29
0 BlackwellPublishers LtdRandon School of Economics 19%.
214 British Journal of Industrial Relations
from the mean of f647.62 produces an exactly compensating effect:
0.5257(ln(684.91)-ln(647.62)) = 0.0294.
25. Analogously, the estimated coefficients in Appendix B imply that the average
worker would need to be paid an extra f230 per month to compensate for the
lack of promotion opportunities (i.e. in order to be just as satisfied with hisher
pay).
26. The set of explanatory variables used comprises those already discussed, minus
Work values and income, plus Job tenure and its square and dummy variables
for Organization type (e.g.public or private sector), the Sex mix of the
workplace, Trade union recognition at the workplace, Pension membership,
Time of day worked, and a variable for whether the individual had had an
accident within the past year. A large number of regressors were used to avoid
the possibility of omitted variable bias.
27. Gibbons and Katz (1992) examine such data for exogenously displaced workers
and find that workers who change industries also change wages in a way that
mirrors the inter-industry wage profile; this finding casts doubt on worker-based
explanations of the wage structure.

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