Fairness of earnings in Europe: the consequences of unfair under- and overreward for life satisfaction

Abstract

Abstract A large percentage of workers in Europe perceive their earnings to be unfairly low. Such perceptions of unfairness can have far-reaching consequences, ranging from low satisfaction to poor health. To gain insight into the conditions that can attenuate or amplify these adverse consequences, comparative research on the role of country contexts in shaping responses to perceived unfairness is needed. Furthermore, justice theory proposes that both types of perceived unfairness—underreward and overreward—cause distress, but evidence on overreward from representative survey data is scarce and laboratory studies have produced mixed results. Data from the European Social Survey (collected in 2018/2019) offer a means of addressing both of these gaps in the research. Studying the association between perceived fairness of personal earnings and life satisfaction in a cross-section of 29 European countries, I find that both underreward and overreward are associated with lower life satisfaction. This relationship is more pronounced in countries where the equity norm is strongly legitimized and weaker in countries where the trade union density is high.