Job Satisfaction and Happiness: New Evidence from Japanese Union Workers

This paper utilizes survey data of Japanese union workers to pro- vide new insights to the "happiness and economics" literature. A cru- cial item that distinguishes our empirical analyses from previous stud- ies is the use of data on workers' expectations of their peers' wages. With our data, we conrm that individuals report higher levels of subjective well-being (SWB) when they perceive that their wages are higher relative to their peers'. On the other hand, the traditional ap- proach in the literature constructs relative wages from Mincer equa- tions, thus presuming that individuals infer their peers' wages the way econometricians do. We argue that this method may be inappropriate. Moreover, we address the issue of endogeneity of our subjective refer- ence income measure employing an instrumental variables approach, and corroborate the causality from relative income to SWB. Addition- ally, we study the relationship between SWB measures and workers' individual characteristics, and compare our results with standard nd- ings in the literature for U.S. and European workers. In agreement with these studies, women and married individuals seem to be happier than their counterparts, men and single workers. However, we observe a U-shaped relationship between education and happiness, which con- trasts with ndings for U.S. and British workers. Finally, we attempt to explain these relationships in the context of the Japanese social background.subjective well-being; relative utility; sub- jective reference income

The Relative Utility Hypothesis With and Without Self-reported Reference Wages

This article makes three main contributions to the economics of happiness literature. First, using a novel data set of about 90,000 Japanese workers surveyed in annual cross-sections between 1990 and 2004, it demonstrates that individuals experience strong disutility when they perceive that their coworkers earn relatively higher wages. In contrast with other tests of the relative utility hypothesis in the literature, our estimation relies on workers' self-reported beliefs of their peers' wages, which we argue are more closely aligned to the "true" reference-group benchmark than the assumed comparison income measures employed in other studies. Second, the article shows important heterogeneous effects of both absolute and relative income on happiness. In particular, workers who are better able to accurately predict their peers' wages seem to experience both greater utility of higher own income and greater disutility of higher relative income. Third, we assess the validity of different methodologies that the literature has employed to construct comparison income measures and find significant discrepancies, particularly when reference income is derived from Mincer equations--a common approach in other studies. We demonstrate that such discrepancies stem from the difficulty in finding valid exclusion restrictions that help identify the relative income effect on happiness. In the absence of self-reported reference wages, we propose a simple IV strategy that does not eliminate the lack of consistency but delivers a lower bound of the "true" effect.

The Relative Utility Hypothesis With and Without Self-reported Reference Wages

This article uses survey data of workers in Japan to study the effects of own and self-reported reference wages on subjective well-being. Higher wages lead to higher life and job satisfaction. When workers perceive that their peers earn higher wages, they report lower well-being. We compare our results with relative utility tests in the literature and develop a generalized version of the classical measurement error model to show that the estimated bias of the reference wage effect can go in both directions. We propose an IV strategy when the self-reported reference wage is not available that does not eliminate the bias but delivers a lower bound of the "true" effect.Subjective well-being, relative utility, reference wages

The Relative Utility Hypothesis With and Without Self-reported Reference Wages

This article uses survey data of 90,000 union employees working in 62 publicly-traded companies in Japan between 1990 and 2004 to study the effect of both own and self-reported reference wages on workers' subjective well-being levels. The availability of self-reported reference wages generates very robust findings that do not depend on questionable identifying assumptions. These findings confirm that higher estimates by workers of their peers' earnings are associated with lower levels of life and job satisfaction. These comparison effects are statistically and economically strong but are smaller in absolute value than the impact of workers' own wages on their own utility. We compare our results with standard tests of the relative utility hypothesis in the literature that recur to alternative proxies for comparison wages, including: (i) Mincer-predicted wages; (ii) cell averages defined over different groups within our dataset; (iii) cell wage averages estimated from an external data source; and (iv) colleagues' average wages. In spite of their potential flaws — that we discuss — these alternative empirical constructs employed in the literature do not introduce a simple classical measurement error problem and the bias attributed to this measurement error issue can go in both directions. We propose a simple IV strategy when the self-reported reference wage is not available that does not eliminate the bias but delivers a lower bound of the "true" effect. We also address the issue of endogeneity of self-reported reference wages in our subjective well-being regressions by accounting for workers' pessimistic attitudes at the workplace.Subjective well-being; relative utility; reference wages

The Relative Utility Hypothesis With and Without Self-reported Reference Wages

November 2010, Revised July 2012ISER discussion pape

The Relative Utility Hypothesis With and Without Self-Reported Reference Wages

This article uses survey data of workers in Japan to study the effects of own and self-reported reference wages on subjective well-being. Higher wages lead to higher life and job satisfaction. When workers perceive that their peers earn higher wages, they report lower well-being. We compare our results with relative utility tests in the literature and develop a generalized version of the classical measurement error model to show that the estimated bias of the reference wage effect can go in both directions. We propose an IV strategy when the self-reported reference wage is not available that does not eliminate the bias but delivers a lower bound of the true effect