People@Work: Why Hourly Wage Earners Are Happier Than Salaried Workers


It goes without saying that workers like money. After all, that's what drives so many people to rise in the morning, endure sometimes epic commutes and sacrifice other equally rewarding parts of life -- such as sleep, dating or regular meals.

Beyond the satisfaction of a job well done (and worth doing), however, is one other key to happiness not often thought about: how wages are earned. A recent study found that workers paid by the hour were much more satisfied with their earnings than their salaried counterparts.

The relationship between money and happiness is stronger for people paid hourly because they're more often reminded of how much they earn, according to researchers at Stanford University and the University of Toronto.

Easier to Measure Value

"If you are paid by the hour or account for your time on a time sheet, you begin to see the world in terms of money and in terms of economic evaluation," says study co-author Jeffrey Pfeffer, a professor of organizational management at the Stanford Graduate School of Business. That creates an obvious link between work and earnings, allowing workers to more easily measure their value, which in turn increases happiness.

Depending on your economic vantage point, however, the study's conclusion may seem counterintuitive. After all, if you're an hourly worker at, say, a McDonald's (MCD) or a Walmart (WMT), being promoted to a managerial (and thus salaried) position would seem itself a path to greater career satisfaction.

But while the nation's workforce is largely equally split between those who earn an hourly wage and salaried workers, only a small portion of those paid by the hour are low-wage workers, says Farrokh Hormozi, economics professor at Pace University in Manhattan. The rest, such as attorneys or consultants, are highly specialized and well compensated. Not surprisingly, Hormozi says, "these are people who are really happiest" in their professions.

At the bottom of the pay scale, however, it doesn't always pay to "trade up" to a salaried position from one that's paid hourly. Retail and restaurant managers, who often earn more than their hourly staffs, frequently work many more hours, thus reducing the hourly rate. Still, Hormozi says, salaried workers in these positions are likely happier because their positions are probably more permanent. When there are layoffs, the cuts are more apt to affect hourly rather than salary workers, he says.

A Quickie Poll

Still, Hormozi says, many salaried workers would do well to look at their earnings in an hourly vein. Take the example a college professor who earns a salary of, say, $80,000 a year. When that amount is divided by time worked -- in this case, about 200 hours a year involving practical work, and classroom and office hours, the hourly wage works out to be about $400, a very attractive amount, even though it would likely be diluted after factoring in research or other unaccounted work.

In anticipation of a call from a reporter, Hormozi performed a quick poll of colleagues at Pace -- "a personal random sample," as he called it. The comments were mixed, with about half saying they would be happier working on an hourly basis because they know how much they're making, says Hormozi, adding, "It's more immediate."

Originally published