Labor earnings reductions, happiness levels and needs hierarchy

Abstract

One of the main economic outcomes of the recent Great Recession has been the decrease of labor earnings in many countries. The relevant literature indicates that earnings and other socioeconomic predictors can influence levels of happiness. This paper tests the effect of pay cuts on happiness levels based on the psychological model of hierarchical needs. The basic idea of hierarchy is that the most important needs must be satisfied first before the secondary needs come into the picture. In a happiness research framework, this implies that for higher income levels, the effect of pay cuts on reported happiness levels becomes much weaker, given that the satisfaction of non-basic needs becomes important. The data used in this paper was drawn from the 5th European Survey on Working Conditions, which focuses on European countries. Two different disaggregation methods were performed, based on absolute nominal income threshold and relative income threshold, respectively. The methods for analyzing the data are the ordinary leastsquares (OLS) regression model, and the Wald chi-square test. The pay cuts are a stronger predictor of happiness for low/middle income individuals than for high income individuals when it comes to disaggregation based on absolute threshold. The regression coefficients of pay cuts for the low/middle income group were not significantly different from those for the high income group regarding disaggregation based on relative threshold. The results seem to depend on the disaggregation method, implying the need for further research and discussion.

An Urban Household Living Wage: An Empirical Overview

“…According to Lam (2016), a substantial amount of low-income households' expenditure goes towards essential needs, such as shelter and food, whereas high-income households typically spend more on needless items. This is corroborated by Drakopoulos and Grimani (2013), who found that the satisfying of non-basic requirements becomes essential at higher income levels, whereas a large amount of the income is spent on food at low-income levels, since food is a basic need. The cost of living is proportional to wages and represents the amount of money required to cover fundamental living expenses.…”

Job satisfaction and support in the medical profession: The foundations of efficient organizational healthcare performance

“…In addition, recent relevant studies such as Diener et al . (2013) and Drakopoulos and Grimani (2017) have converged on the perception that the degree of impact which a change in income has on Subjective Well-Being is related to the prioritization of the satisfaction of the each employee's needs and to the extent that prosperity is perceived by the individual as more material or related to intrinsic values and motivations, such as recognition. The latter is confirmed by the findings of the present study, which identified recognition and the level of autonomy as important factors for a positive contribution to the job satisfaction of doctors in public Greek hospitals.…”

Assessment of Young People’s Motivation for Pursuit of Higher Degree in the Field of Education: Implications for Educational Philosophy and Teacher Policy in Nigeria

“…In Economics, it may be easier to estimate the severity of poverty and effect of an increase in income. To this effect, it is easier to estimate the income effect of (increased) motivation (see Benda-Prokeinová et al, 2017; Drakopoulos & Grimani, 2017; Frey, 1997; Xiao & Anderson, 1997). There are few of such studies on indigent graduate students who seek to acquire a higher degree in Education.…”

“…Other economic theories of motivation are concerned with general consumer utility maximization (see Benda-Prokeinová et al, 2017, for their estimation of Engel curve and consumer behavior). Seely (1992) earlier attempted to fit budget constraint to a utility maximization model to indicate the level of motivation while Drakopoulos and Grimani (2017) fitted data to estimate happiness levels of individuals (motivation) when their income is reduced. But literature that estimates the income effect for acquiring higher degree in Education is rare.…”