Nonlinear evaluation of status and signal effects

The purpose of this paper is to describe whether workers in high positions and workers in low positions think differently about status and possible future career advancement opportunities.

The paper uses German panel data to examine the effects of relative standing on individual satisfaction with the job, the propensity to change jobs, and intentions to start-up an enterprise in the near future.

The relationship between relative wage positions and job satisfaction is inversely U-shaped. This is interpreted as evidence that low status translates into low utility while employees with high relative standing seem to be more concerned about the lack of future career prospects in paid employment. Workers who gather utility from status and career advancement opportunities simultaneously are more satisfied with their jobs. The paper also shows that lower satisfaction with the job translates into considerations to leave the job.

The described relationships explain individual determinants of voluntary quits and workforce fluctuations, which are of special interest in debates about possible shortages of skilled labor or tightening labor markets for skilled workers.

Individual comparisons with peers affect individual reasoning.

The paper aims to enhance the discussion about nonlinear effects in status considerations as well as future career advancement opportunities. The paper shows that workers in very high and very low positions value these important psychological traits differently.