An analysis of the determinants of pay and well-being using employer-employee data
This thesis studies the determinants of pay and well-being. The first three chapters use new British employer-employee data to study the determinants of pay. Chapters three and four are also interested in the determinants of job satisfaction, whilst chapters five and six analyse factors that shape reported well-being. Chapter two tests whether firms share product market rents with their employees. After controlling for worker and firm fixed effects, we observe evidence in support of rent-sharing upon weekly earnings, but no robust positive effect upon hourly pay. The third chapter analyses the observed positive relationship between employer size and wages. It designs a test as to whether this relationship reflects a compensating differential. This is not found to offer a good explanation as to why wages are greater in large establishments. Instead, correlates of worker skill and person fixed effects are most successful in explaining the plant size-wage differential. There has been very little research on racial differences in job satisfaction levels. Chapter 4 examines the relationship between race, pay and well-being. Workplaces that employ more ethnic minority employees are associated with lower levels of job satisfaction, for both white and non-white workers. Non-white employees are paid less than otherwise similar white employees, and are less satisfied with their pay even when pay is held constant. One of the most fundamental ideas in economics is that money makes people happy. Chapter 5 constructs a test. In the spirit of a natural experiment, it shows individuals who receive windfalls have higher mental well-being in the following year. It calculates the size of the effect. The final chapter studies the well-being of British public sector workers in the 1990s. Relative to private sector employees, stress levels and job satisfaction within the public sector are shown to have significantly worsened over the decade.