Coping with low pay: cognitive dissonance and persistent disparate earnings profiles

Duncan Watson, Robert Webb, Alvin Birdi

Research output: Contribution to journalArticle

Abstract

The paper focuses on an employee’s perception of his or her own labour market outcome. It proposes that the basic earnings function, by adopting an approach that ignores perception effects, is likely to result in biased results that will fail to understand the complexities of the wage distribution. The paper uses an orthodox job search framework to illustrate the nature of this problem and then adapts the model to take onboard the theory of cognitive dissonance. The search model indicates how workers may adopt a coping strategy in order to reduce the disutility associated with the wage underpayment that develops. Then, by modelling cognitive dissonance, the paper highlights the weaknesses of using purely human capital proxies to understand labour market outcome. The analysis goes some way to explaining why individuals with equivalent human capital investment can have disparate earnings profiles.

Original languageEnglish
JournalTheory and Decision
DOIs
Publication statusPublished - 1 Jul 2005

Fingerprint

Cognitive Dissonance
cognitive dissonance
Salaries and Fringe Benefits
human capital
wage
coping
labor market
Wages
Economics
Personnel
job search
capital investment
Proxy
employee
worker
Labour Market
Human Capital
Labor market outcomes
Low pay
Cognitive dissonance

Keywords

  • job search model
  • cognitive dissonance
  • wage differentials

Cite this

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Coping with low pay: cognitive dissonance and persistent disparate earnings profiles. / Watson, Duncan; Webb, Robert; Birdi, Alvin.

In: Theory and Decision, 01.07.2005.

Research output: Contribution to journalArticle

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