Labor earnings reductions, happiness levels and needs hierarchy

Authors

  • Stavros Drakopoulos Department of History and Philosophy of Science, National and Kapodistrian University of Athens. University Campus, Ano Ilisia, 15771, Athens, Greece
  • Katerina Grimani Department of History and Philosophy of Science, National and Kapodistrian University of Athens. University Campus, Ano Ilisia, 15771, Athens, Greece

DOI:

https://doi.org/10.5502/ijw.v7i1.540

Keywords:

pay cuts, happiness, subjective wellbeing, Maslow’s Hierarchy of Needs

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 least-squares (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.

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Author Biographies

Stavros Drakopoulos, Department of History and Philosophy of Science, National and Kapodistrian University of Athens. University Campus, Ano Ilisia, 15771, Athens, Greece

Professor Drakopoulos obtained a B.A. in economics from The Economics University of Athens, and a M.Sc and Ph.D in economics from the University of Stirling, UK. He was a Teaching Assistant (1986-1988) at the University of Stirling, Lecturer A (1988-1989) at the University of  Glasgow, Lecturer B (1990-1996) at the University of Aberdeen, Assistant Professor (1996-2000) and Associate Professor (2000-2005) at the University of Athens. He is currently a full Professor of Economics in the Department of Philosophy and History of Science of the University of Athens (since September 2005). His research interests include Economic Methodology and History of Economic Thought, Labour Economics, and the Economics of Subjective Well-being. He has 45 Scientific Publications in Refereed Journals, 4 books, 13 Articles in edited books and Encyclopedias including books published by Routledge, Edward Elgar, Springer, and 15 Book Reviews.

Katerina Grimani, Department of History and Philosophy of Science, National and Kapodistrian University of Athens. University Campus, Ano Ilisia, 15771, Athens, Greece

Dr Aikaterini Grimani holds a PhD degree from the Department of History and Philosophy of Science, National and Kapodistrian University of Athens, Greece. She also holds a M.Sc. in Basic and Applied Cognitive Science and a M.Sc. in Health Care Management. Her main research interests include, among others, employee relations, health and safety at the workplace, employee psychological well-being and leadership-followership interactions. She is currently working as a postdoctoral researcher at Karolinska Institute, Institute of Environmental Medicine, Intervention and Implementation Research Unit for Worker Health.

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Published

2017-06-08

Issue

Vol. 7 No. 1 (2017)

Section

Articles

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