'People prefer respect to money but money is important because we use it as a gauge for respect' - Claudia Hammond, psychologist and author of Mind over Money
People are prepared to leave a job they enjoy and colleagues they get on well with to go elsewhere for a higher wage. 'Nevertheless, the relationship between a salary and job satisfaction is quite weak. A higher wage doesn't really make you happier', says Claudia Hammond, who investigated scientific research about money for her book Mind over Money . 'People often get this wrong and think that a higher wage will make them happier.'
Why are we tricked by a wage? 'Salary is a symbol of status and prestige, a way of gauging how much we are valued', she explains. 'People prefer respect to money but money is important because we use it as a gauge for respect'
If job satisfaction is the criteria, then the fairness of our wage is more important than the exact amount that appears in our accounts every month. It's not how much we earn that is important, but how much we earn compared to others.
'We hate the idea that we are being paid unfairly. We consider this to be a loss and dislike losing', adds Claudia Hammond.
She refers to a phenomenon that is called loss aversion in psychology. 'We place huge importance on suspicions that a colleague has more even if we already have a high salary and the difference doesn't amount to much'
The difference between the highest and lowest wages in an organisation is increasing and Claudia Hammond believes this a negative development. It is the reason for a great deal of bitterness. Employees become extra critical of management decisions as a result; they earn so much money but can't even make a decent decision.
'Lowering wage tension is a good initiative', explains the psychologist. 'You don't want to make it look like you value one person much more than another. You want to create the feeling that everybody is working together, that everyone is pulling in the same direction. That is really tricky when there are huge wage differences.'
Bonuses are a way to motivate employees to put in improved performances. The research that Claudia Hammond examined about the effectiveness of bonuses showed that they are most effective for piece-work.