Satisfaction, Market Wages, & Labor Relations: An Airline Study

Satisfaction, Market Wages, & Labor Relations: An Airline Study

PETER CAPPELLI and PETER D. SHERER*

W e use arguments from economics and industrial relations to help examine aspects of job satisfaction in the context of a changing industrial relations scene. Market comparisons and wage contours provide the strongest predictors of pay satisfaction. Results also suggest that workers in the “B” tier of two-tier wage plans are in fact more satisfied with pay and that overall, workers are more satisfied with less supervision and more control over their work.

WORKERS’ ATTITUDES AND JUDGMENTS about their jobs have received relatively little attention in industrial relations, even though they have been identified as having important effects on employment issues. The arguments that follow combine ideas from the fields of industrial relations and economics with behavioral measures to examine aspects of job satisfaction in a major airline whose labor-management relations are undergoing change. Survey data are used to explore the relationship between job satisfaction, labor market variables, and contemporary issues associated with the restructuring of U.S. labor relations, such as work rule changes, employee participation plans, and two-tier pay systems. Our results indicate that markets and wage contours, measures traditionally emphasized by economists and industrial relations scholars, are very good predictors of satisfaction.

* The authors’ affiliations are, respectively, The Wharton School, University of Pennsylvania and the Institute of Labor and Industrial Relations, University of Illinois.

‘This paper is part of a larger study conducted with Robert B. McKersie and Kirsten Wever. Thanks to Fritz Drasgow, Wallace Hendricks, Hervey Juris, Lawrence Kahn, David Lewin, David Lipsky, and Motohiro Morishima for helpful comments.

INDUSTRIAL RELATIONS, Vol. 27, No. 1 (Winter 1988). 0 1988 Regents of the University of California 00 19/8676/88/2 15/56/$10 .OO

56

Satisfaction, Wages, and Labor Relations I 57

Conceptualizing Job Satisfaction Behavioral researchers interested in industrial relations topics have tended

to focus on individual workers and their attitudes; economists and industrial relations researchers have focused more on the collective decisions of individuals, in the form of labor market effects. In both approaches, a central concern is the assessment workers make of the value or utility associated with jobs. Behavioralists attempt to measure this value directly, using the concept of job satisfaction. Job satisfaction can be defined as a pleasurable emotional state associated with one’s job (Locke, 1976). Different facets of satisfaction are associated with various aspects of jobs, such as pay, supervision, and the way that work is performed. These aspects of satisfaction should be important, as Locke notes, simply because happiness is an overall goal of life. More practically, satisfaction with one’s job has an important influence on such employment behavior as turnover (Mobley, 1977) and absenteeism (Steers and Rhodes, 1978); on overall employment costs (Mirvis and Lawler, 1977) and (under certain conditions) productivity (Triandis, 1959; Herman, 1973); and on traditional labor relations issues.*

The determinants of satisfaction. Behavioral researchers attempt to explain the variance in satisfaction across individuals by appealing to individual characteristics and to job-specific circumstances. There have been few attempts to incorporate arguments beyond the individual and the job ~ e t t i n g . ~ Economists, in contrast, rarely attempt to measure satisfaction directly, but they are interested in the concept and certainly have ideas about its causes. In general, these ideas stem from Adam Smith’s (1976) argument that people judge the value or utility associated with any job by comparing it with the other jobs available and the utility associated with them. Thus, for Smith and others, satisfaction is a relative concept that stems not only from the individual and the circumstances of hislher current job but also is influenced by opportunities in the general labor market.

Most industrial relations scholars have accepted this market-based view; and to the extent that there is a unique industrial relations perspective, it has similar roots. Dunlop (1957) and Livernash (1957), for example, emphasize that, in addition to the impact of market forces, pay comparisons

ZHamner and Smith (1978), for example, report that job satisfaction is associated with worker involvement in a range of union organizing activities, while Schriescheim (1978) finds a relationship between various aspects of job satisfaction and voting in union representation elections.

3The most notable attempts are the Cornell Job Satisfaction studies (see Smith et al., 1969), which find evidence that economic opportunities within the community, broadly defined, affect workers’ satisfaction with their jobs. Berger and Cummings’ (1979) survey of the macro organizational literature on attitudes suggests that explanations of job satisfaction generally are based on intraorganizational factors.

58 / PETER CAPPELLI AND PETER D. SHERER

and satisfaction with pay may follow “wage contours”-similarities in pay and movements in wages-that exist across organizations because of institutional forces (union pressure, custom and practice, etc.). Ross (1948) argues that in unionized settings, satisfaction with pay and wage settlements explicitly involves comparisons with other settlements, especially those reached by union competitors, in part because unions are political organizations that compete for members.

Behavioral and economic views of job satisfaction occasionally show signs of convergence. In one of the first psychological studies of job satisfaction, Hoppock (1935) noted that the higher than expected levels of satisfaction during the Depression may have been due partly to the fact that workers felt happy just to have a job, that their judgments were in part relative and based on circumstances in the market. March and Simon’s (1958) notion of inducement utilities (the value of compensation) and contribution utilities (the value of foregone opportunities) in determining job satisfaction is virtually identical to Smith’s contention that satisfaction is judged by comparing the value of a job relative to opportunities elsewhere. The behavioral arguments that seem closest to the economists’ position are those associated with equity theory (Adams, 1963). The latter asserts that individuals compare the ratio of their job inputs (skills, effort, etc.) to outcomes (rewards such as pay, interesting work, etc.) with the inputs and outcomes of referent others to determine whether their own rewards are “fair”; if they are not, inequity and dissatisfaction may result. One difficulty with applying equity theory as a predictive device is that establishing the identity of the referents may be difficult. One important attribute of the theory, however, is that it identifies a potential relationship between satisfaction and tangible job outcomes: Perceived equity can be restored by quitting, by reducing inputs, or by rationalizing the i n e q ~ i t y . ~

Economists’ move toward the behavioral approach is more recent, beginning with attempts to examine some simple measures of satisfaction, Flanagan et al. (1974) use economic arguments to examine national trends in some consequences of job dissatisfaction (such as low productivity). Freeman (1978), Duncan and Stafford (1980), and others include simple measures of overall job satisfaction (broadly defined) as independent variables in wage (and other) equations. Hamermesh’s (1977), Freeman’s (1978), Bartel’s (1981), and others’ use of similar measures as dependent variables mark the most direct steps toward the behavioral approach.

In general, however, economists and industrial relations researchers have

4While the third is often the easiest option, it is not always the one chosen. Lord and Hohenfeld (1979), for example, find evidence that reduced performance is associated with perceived inequity in the performance of major league baseball players.


not applied their arguments empirically to measures of satisfaction, and behavioral scholars have not incorporated the market-based and extra- organizational arguments from economics and industrial relations in their studies of satisfaction measures. Here, we do some of each.

Study Site and Sample Our study is based on an attitude survey at a major, heavily unionized

airline. Questions of union-management relations and of contract changes are therefore of central importance to the workers’ attitudes and to our study. In addition, airline employees function in clear and distinct labor markets defined by occupation: pilots, flight attendants, mechanics, and ground serviceklerical employees. The characteristics of these labor markets (e.g., prevailing wages) can be readily identified. Examining questions of satisfaction across different occupations and labor markets allows market variables to be incorporated into the analysis, and it also provides a test for the robustness of our arguments across situations.5

The survey was conducted in 1985, when labor relations and the terms and conditions of employment in the airline industry were being restructured. Air transport was recovering from the sharpest financial downturn in its history. Virtually all carriers suffered heavy losses in this period (late 1980 through early 1984), and many faced financial collapse (Cappelli, 1987). The restructuring of labor relations and concessions in the terms and conditions of employment played a major role in the survival plan of the carrier we studied. That plan’s features included wage concessions by all of the unions, a two-tier wage plan, and productivity gains brought about by restructuring jobs and schedules. In return, the unions secured mechanisms to allow workers greater participation in management decision making, including union representation on the carrier’s board of directors. The employees’ attitudes toward these issues were crucial because their approval of the proposed changes (e.g., through the ratification of union contracts) was a necessary part of securing the carrier’s survival plan.

Our sample is composed of 579 employees selected at random (approxi- mately a one in 20 sample), and it is stratified to ensure a minimum of 50 respondents in each subgroup or cell considered in the analysis. The response rate (using two follow-up mailings) was 5 5 per cent.

Further, although we cannot identify the differences in job characteristics across workers that many behavioral researchers rely on to explain satisfaction, we know that, owing to common government and union regulations, airline jobs (by occupation) are virtually identical within and across carriers.


Model and Hypotheses Of the components of job satisfaction, pay is among the most important.

First, unlike some aspects of jobs, pay is a tangible item that is relatively easy to identify and define conceptually. Second, as Heneman (1985) notes in his recent survey of the literature, compensation has wide-ranging and strong effects on job behavior. From the economists’ perspective, judgments about pay are critically important because pay is seen as the variable that equalizes or “compensates” for differences in other aspects of work across jobs. And as Stigler (1962) notes, pay is both the easiest aspect to compare across jobs and is typically the job characteristic about which people outside the organization have the most complete information.

Pay rate variables. Our analysis of pay satisfaction begins with arguments from economics that use the market context and opportunities elsewhere to explain the variance in pay satisfaction across individuals. While this argument seems obvious, except for Hamermesh’s study (1977), which includes an estimate of expected earnings, there have been no attempts to examine the economists’ perspective empirically. We begin by identifying 19 different jobs at the carrier, each with roughly eight seniority and pay levels. Then the prevailing wage for equivalent jobs and seniority levels in the outside market is calculated by averaging the wages paid across other carriers.

These wage measures provide an assessment of the market wages that airline employees would use to make their comparisons. Because of carrier- specific seniority pay, these wages are not necessarily what workers would earn if they switched carriers. But, over time, union bargaining demands and other pressures have established “wage contours” across airlines and have created strong pay comparisons among them, even for jobs above the entry level (Kahn, 1971). Holding constant a worker’s own wage, we expect pay satisfaction to be negatively related to the market wage-less satisfied as the prevailing wage elsewhere rises. Satisfaction should, of course, increase (ceteris paribus) as the individual’s own pay rises, as other studies have shown (see Dyer and Schwab, 1982).

We also include separate variables to identify the collective bargaining decisions that were made with respect to wages in each of the four basic

hThe data for other carriers were provided by the Airline Industrial Relations Conference (AIRCon). Industry wages are the unweighted means of the wages paid at carriers of comparable size; in practice, this means former trunk carriers. For pilots, and to a lesser extent flight attendants, pay is based on a complicated formula that varies (within each carrier) with aircraft flown, conditions, etc. Comparisons for pilots were made for similar aircraft by rank and seniority at other airlines. It was impossible to include other factors affecting pay.


occupational labor markets-pilots, flight attendants, mechanics, and ground1 office support.' All employee groups at this carrier agreed to achieve roughly similar percentage reductions in labor costs, but they did so in very different ways. For example, because they can easily move to the very strong outside labor market, mechanics took their concessions entirely in the form of manning reductions (layoffs). Pilots made their concessions entirely in pay cuts to prevent layoffs because it is very difficult for them to secure equivalent positions elsewhere, given steep seniority pay and promotion arrangements. The other groups chose positions in between. Therefore, we expect pilots to be relatively less satisfied with their pay, independent of how it compares to market levels, because it had been cut so recently. Mechanics should be relatively more satisfied with their pay than the other groups because their concessions and the attention generated by them did not lead to pay cuts.

Our analysis provides a direct measure of the extent to which the outside market is an important factor in employee assessments of pay by asking respondents questions about the importance they attach to different pay comparisons. These questions can also be thought of as assessing the information that workers have-the market wage may have little influence, for example, if workers are unaware of it. The sign associated with this measure obviously will depend on how salient the comparison with the wage is.' At this carrier, wages tended to average slightly below the prevailing wages calculated for the outside market. We therefore expect greater reliance on market comparisons to be negatively associated with pay satisfaction. To be certain that this variable is actually measuring interest in the outside labor market and not simply interest in pay comparisons generally, we add controls by also asking about the strength of pay comparisons with other jobs at the carrier and with jobs outside the industry. In addition, a variable is included to measure whether workers had been laid off in the past five years. Workers who have been laid off may be more satisfied with pay and other aspects of their job because, as Hoppock (1935) noted, their expectations have been lowered by experiencing a worse alternative.

Conditions of employment variables. A second category of explanations focuses on changes in the terms and conditions of employment and in the structure of labor relations. Of particular interest is the carrier's two-tier

'In addition, a different union represents workers in each of these labor markets, making it impossible to separate the effects of belonging to different unions from the effects of being in different labor markets. In general, the latter appears to be a much more important factor; it seems to drive union dccisions.

* For example, Lawler (1965) notes that greater importance may be attached LO market comparisons when they are particularly invidious. Workers are also likely to artach more importance to market comparisons where mobility is easier. Unfortunately, we could not measure this. The potential for colinearity between these comparisons and the market wage variable may bias the results for both downward.


wage system. All of the sample occupational groups have two-tier pay scales which began a little more than one year before our survey. Two-tier pay plans set lower rates of pay for workers hired after a certain date, the “B” scale, than for those hired before that date, the “A” scale. The two-tier plans vary across agreements, but generally rates of pay for those in the “B” scale remain about 25 per cent below those with similar seniority in the “A” scale. After a period of from five to 15 years (depending on the agreement), most reach parity with the “A” scale.

Two-tier wage plans are now in effect at every major carrier, and in many other industries as well. Little is known yet about the effects of these wage systems, but observers have speculated that the plans are divisive for unions and create bad morale and dissatisfaction, generally among employees in the “B” tier (e.g., see Cole, 1984). Jacoby and Mitchell’s (1986) survey finds that a majority of management whose firms have two-tier plans believe that the plans will damage morale. Certainly the equity literature suggests a priori that workers in the “B” tier should be less satisfied with their pay because they are receiving less for the same job than are workers hired a short time before.

Our survey allows us to identify a worker’s tier and to assess the effect of tier on satisfaction. Other factors, however, could potentially confound the analysis. For example, “B” scale employees also tend to be younger and to have had less job experience than “A” scale employees. As Borjas (1979) argues, greater age can increase job satisfaction because it provides greater opportunities to find a good “match” between worker characteristics and jobs. An age variable is included to control for this, and a variable for seniority is included to make certain that tier effects are not simply subsets of a more general relationship between seniority and satisfaction.’

Workplace characteristics variables. The third set of explanations focuses on characteristics of work and labor relations. One group of variables asks about the sources of information workers use to make judgments about their jobs and about labor relations. Management obviously stresses more positive aspects, and those who listen intently to management will get more positive information and possibly will be more satisfied. In contrast, unions serve their traditional role as an opposition to management by channeling discontent and are likely to point up problems with jobs and with work relations.

9The tier variable is derived from the hiring date, and by definition, two-tier plans only change the pay of those yet to be hired. Therefore, it is impossible to examine two-tier programs with pretest and posttest surveys of changes in attitudes because there are no “B” scale employees before a two-tier plan is introduced.

Satisfaction, Wages, and Labor Relations i 63

Those who listen intently to the union will get more information about problems and may report less satisfaction. lo

The remaining variables in this category are based on perceptions of changes in jobs and in labor relations. These include a measure of perceived changes in the way jobs are performed, perceived changes in work schedules, the employees’ sense of participation in decision making at the carrier, and worker assessments of their influence over their own jobs. These kinds of changes are a fundamental part of the restructuring of industrial relations that is taking place in many organizations.” With the possible exception of participation, there have been no assessments of the effects that these changes have had on employee attitudes toward their jobs.

Equity theory and compensating differential arguments suggest that if these changes are seen as detrimental, then satisfaction with pay should decrease. To the extent that changes in work rules and changes in schedules have been portrayed as concessions, we might expect a greater perception of such changes to be negatively associated with pay satisfaction. To the extent that the Quality of Worklife movement is correct in suggesting that workers prefer greater participation in and influence over their work, these variables should be positively associated with pay satisfaction.

Our measures of changes in jobs and relationships are after-the-fact assessments, and as such they are less rigorous than pretest and posttest experimental assessments of attitudinal changes. In addition, the period covered by these variables begins before the two-tier wage system was introduced. The change-related questions are therefore inappropriate for the workers in the “B” tier. We address this problem by examining these questions with a separate regression which excludes “B” tier responses and the tier variable.’* Despite the methodological drawbacks of our job change variables, we believe that, overall, the issues raised by our variables are important enough to merit including them. Table 1 lists all of the independent variables and their mean values.

Survey data. The satisfaction scales are based on the Minnesota Satisfaction Questionnaire; the scales measuring changes in work and changes in schedules are based on questions that identify some aspects of the job-related changes .~

‘OThis is not to suggest that unions generate dissatisfaction, as some argue, or that workers are worse off because of the presence of a union. Indeed, workers are best served by getting both sides of the story. We also recognize that causation could run in the opposite direction-those dissatisfied with their iobs may be more likely to listen to the union and those satisfied more likely to listen to management.

I ’ See Rosow and Zagar (1982) and Cappelli and McKersie (forthcoming) for examples of current work rule changes and Freedman (1985) for an assessment of the extent of these changes.

I2The alternative of including both sets of variables in a single pair-wise regression would cause the sample size to vary across variables (e.g., just “A’ tier workers for the change variables but all workers for the other variables), and the results would be difficult to interpret.


TABLE 1

Independent Variables, Mean Values, and Standard Deviations”

Wage $17.06/hr 10.62

Market wage (for comparable jobs and seniority)

Mechanic = 1; other = 0 (% in mechanic and related jobs)

Ground (% in ground and clerical jobs)

Pilot (YO in pilot jobs)

$20.68/hr 12.98

21%

36%

14%

Flight attendants (omitted variable) 27%

Compare mkt, 1 4 scale (comparisons with other carriers)

Compare outside, 1-4 scale (comparisons with jobs outside airlines)

Compare carrier, 1-4 scale (comparisons with other jobs at the carrier)

Layoff = 1 if yes (% laid off within past 5 yrs)

Union dues = 1 if paying (% not paying union dues: not members, no agency shop)

Tier = 1 if “A” (% of sample in ‘B’ pay scale)

3.6

3.0

3.3

20%

2.5%

16.8

.67

.96

.86

Age 40 yrs 9.5

Seniority 9.7 yrs 7.7

Part-time (% part-time)

Manage info, 1-4 scale (importance of info from management)

Union info, 1-4 scale (importance of info from union)

Particip., 1-4 scale (sense of participation)

Job infl, 1-4 scale (sense of influence over job issues)

Change work, 1-4 scale (perceived changes in tasks)

Change time, 1-4 scale (perceived changes in schedules)

9%

2.8 .85

2.8 .83

2.1 .57

2.4 .74

2.3 .59

2.7 .88

~

“See Appendix for information regarding the scales and factor analyses.


at the carrier. The participation scale is composed of questions measuring worker assessments of the arrangements for union and employee participation in management decision making. The job influence scale is based on questions taken from Kochan et aZ.’s (1975) study of attitudes toward quality of worklife programs.13

Results Table 2 presents the statistical relationships between pay satisfaction and

the independent variables outlined above. These results are for ordinary least square (OLS) regressions, the psychometric convention with attitudinal scales. l4 The first set of variables and relationships relate to our labor market arguments. Pay satisfaction is positively and significantly related to the respondent’s wage, but it is negatively and significantly related to the market wage associated with the respondent’s job and seniority level. Indeed, as measured by unit-free Beta coefficients, the wage and market wage have by far the largest effects on pay satisfaction. The extent to which workers make comparisons with similar jobs at other carriers is one of the strongest variables in the equation. Its negative sign supports the relationship with the market wage-greater market comparisons are associated with less pay satisfaction. Together, these results suggest strong support for the hypothesis that workers’ satisfaction with pay is heavily influenced by the circumstances in their respective labor markets, independent of their own wages.

The variables identifying the separate labor markets in Equation 1 suggest that pilots are the least satisfied and mechanics are the most satisfied with their pay, but the significance of these results vanishes when the change variables are added (see Equation 2). The differences in pay satisfaction across occupational groups therefore seem to be due to the fact that these change variables vary systematically across the different occupations.

The results associated with the two-tier wage structure in Equation 1 suggest, contrary to popular opinion, that workers in the “B” or lower tier are actually more satisfied with their pay than are workers in the “A” tier.

I7Factor loadings are the basis for combining the questions into scales, and uniform weights are used because the factor weights are roughly similar. See the Appendix for information regarding these scales and the factor analyses.

I4The underlying nature and distributional characteristics of attitudinal issues are neither obvious nor well understood. However, ordinal scales of attitudes do not appear to be the same as censored variables-where some values of the dependent variable that correspond to known values of the independent variables cannot be observed-which Heckman (1976) notes can lead to biased estimates. To the extent that satisfaction measures can be thought of as continuous variables that have been constrained into discrete, ordinal scales, information is lost, and the standard error of the estimates is increased. The significance of our coefficients and our R2 values, therefore, is understated, if anything (see Drasgow and Dorans, 1982).


TABLE 2 PAY SATISFACTION OLS REGRESSION RESULTS

Independent Equation 1 Equation 2 Independent Equation 1 Equation 2 variables v a r i a b 1 e s

Constant

Sex

Layoff

Wage

Market wage

Mechanic

Ground

Pilot

Compare mkt

Compare carrier

Compare outside

Manage info

Union info

2.73*** (8.51)

0.01 (0.88)

0.10 (1.5) 0.054** *

(2.43)

-0.039** * (2.5) 0.31***

(2.6) 0.05

(0.44)

(2.01)

-0.27*** (6.26)

0.21 (0.64)

-0.41**

-0.04 (1.5) 0.15***

(4.98)

0.018 (0.58)

2.51*** (6.12)

0.03 (0.46)

0.79 (1.2) 0.038*

(1.7)

-0.28* (1.8)

(1.1) -0.09

0.16

(0.60)

-0.25

-0.2s*** (5.62)

0.005 (0.17)

(1.1) 0.083***

(2.59)

(0.61)

(1.3)

-0.03

-0.019

Union dues

Seniority

Part-time

Tier

Particip.

Job infl

Change work

Change rime

R2

R 2

Sum of squares regression

Sum of squares residual

F Signif F =

0.22 0.26 (1.23) (1.33)

(1.29) (2.24)

-0.07 0.008” (1.4) (1.81)

-1.26 -0.11 (1.21) (1.05)

-0.98** - (2.05) -

-0.005 -0.009**

0.26* * * (5.3) 0.08**

(1.9) 0.041

(0.90)

(2.41) -0.14**‘

.28 .34

.26 .31

64.2 68.9

163.6 135.2 11.75 11.77

0.00001 0.00001

* Significant at 10 per cent; **significant at 5 per cent; ***significant at 1 per cent level, two-tailed tests.

The effect is strong, and it holds despite controlling for job seniority and age. In fact, seniority works in the opposite direction, indicating that, in general, pay satisfaction increases with greater seniority, Controlling for the individual’s pay and other factors.” The explanation for this surprising tier result may be straight-forward. Workers in the lower, “B” tier are still new to the carrier and may not identify themselves as closely with the industry as do more senior employees. Regression results (available from the authors

It is important to note that the difference in pay satifaction between “A” and “B” scale workers may well be much greater and more significant than this coefficient suggests because many of the variables included here go beyond controlling for confounding factors and actually help explain the difference between tiers (e.g., pay comparisons).


on request) of the survey questions identifying pay comparisons suggest that “B” tier workers are less likely than their “A” tier colleagues to make comparisons within airline labor markets. Comparisons with jobs they left behind or jobs they could have had outside the industry are likely to make their current pay look better than are comparisons with the prevailing wage at other carriers. l6

The variables which examine work and labor relations issues also suggest interesting relationships with satisfaction. First, there is a strong, positive relationship between pay satisfaction and the extent to which respondents get their information from management. One of the strongest and most significant relationships with pay satisfaction is the correlation with workers’ sense of participation in the organization. The relationship with the sense of control over issues associated with one’s job was also positive and significantly related to satisfaction. To the extent that participation and influence are valued and are seen as outcomes or rewards, workers feel more satisfied with the level of their pay when these are present, as equity theory and compensating differential arguments would suggest. Changes in schedules are inversely related to pay satisfaction but perceived changes in job tasks are not significant.

Other Measures of Satisfaction

In addition to pay issues, satisfaction with work-the characteristics of tasks and how they are performed-is at the core of job satisfaction. Perhaps the arguments used to explain satisfaction with pay could also explain satisfaction with work. l7 The literature addressing satisfaction with work issues is voluminous (see Locke, 1976). Moreover, the interest in this area is not limited to academicians. Concern about dissatisfaction with the nonpay aspects of jobs and the adverse behaviors associated with it, such as absenteeism, low quality, and declining productivity levels, prompted the Quality of Worklife movement in the seventies.

As Stigler (1962) notes, workers are unlikely to be able to make systematic comparisons with other jobs in their labor market on any issue other than pay because in practice such information can be obtained only on the job. As a result, workers would be likely to make comparisons on nonpay issues with jobs for which they have detailed information-jobs they held before

‘hEconomists would argue that the fact that the respondents chose their current jobs suggests that they thought their present jobs were better than the jobs they could have had elsewhere. Even with “B” scale wages, unionized airline jobs no doubt pay more than most other entry-level jobs.

”The questions used to compile these satisfaction scales are available from the authors upon request, as are the factor scores and reliability coefficients.


working at the carrier, for example, or jobs held by family and friends. On average, such jobs are less likely to be in the employee’s airline-based occupational labor market than in other markets. Variables that identify characteristics of the employee’s labor market therefore may not be as relevant here, although we might expect mechanics to be less satisfied with work because, as noted above, the manning concessions they made may have focused attention on work rule issues.

Regression results for work satisfaction are reported in Table 3. The variables identifying labor markets are not significant, but market wages appear to play a role perhaps, as Spence (1976) argues, because wages can provide a signal about other aspects of jobs, and workers may use those signals to make judgments about work in other jobs (e.g., higher wages are associated with more interesting work). As with pay satisfaction, the market wage has the largest effect on work satisfaction of any variable, as measured by Beta coefficients. The most statistically significant relationship in the equation is with the extent of comparisons with jobs outside of the airline labor markets. Presumably, these are jobs for which the respondents have information about the nature of the work as well as the pay (e.g., jobs they held previously). The stronger these comparisons are, the less satisfied the respondents are with their work. This result could imply that the nature of work at the carrier does not compare favorably to work elsewhere; or perhaps those who are dissatisfied with their work are more inclined to make comparisons with jobs about which they have information.

Workers in the “B” wage tier are significantly more satisfied with work than are their counterparts in the “A” tier. Because there are no systematic differences in work by tier, this relationship is most likely due to different standards or comparisons for what constitutes good work. It may be that “B” tier employees have lower standards because their comparisons are more likely to be outside the industry, possibly with less attractive jobs.

The most important explanations for work satisfaction, not surprisingly, relate to job-specific measures and labor relations issues. Neither union nor management information made much difference to work satisfaction, presumably because these judgments are based on comparisons and information that the workers can gather on their own from their immediate circumstances. Perceived participation and sense of influence on work decisions also have strong and significant effects, as do perceived changes in work.’* On the other hand, perceived changes in work schedules are

lSThe questions comprising the perceived changes in work scale reflect changes in work rules that were thought to be important at the time of the survey; these include greater variety of tasks, greater autonomy, etc. These aspects roughly follow the facets of jobs identified by Hackman and Oldham’s (1976) Job Diagnostic Survey.


TABLE 3 SATISFACTION WITH WORK REGRESSION RESULTS

Independent Equation 1 Equation 2 Independent Equation 1 Equation 2 variables variables

Union dues -0.19 -0.15 2.31*"" 1.91 w 0 ;x

(7.9) (5.16) (1.2) (0.84) Constant

Sex

Layoff

Wage

Market wage

Mechanic

Ground

Pilot

Compare mkt

-0.036 (0.61)

-0.013 (0.22)

-0.019 (0.99) 0.024%

(1.8) 0.08

(0.79) -0.23 (0.224) 0.02

(0.12) 0.04

(1.1)

0.026 (0.43)

(0.56)

(0.94)

(1.6)

(0.55)

(1.07) 0.06

(0.345) 0.068"

(1.7)

-0.03

-0.019

-0.023"

-0.075

-0.14

Age

Seniority

Part-time

Tier

Particip .

Job infl

Change work

Change time

0.001 (0.35)

-0.00014 (0.033) 0.038

(0.70) -0.26*** (3.1) -

-0.002 (0.56)

-0.003 (0.59) 0.086

(0.94) - - 0.21"**

(4.62) 0.16***

(4.56) 0.16* +'

(3.74) -0.07 (1.5) . ,

Compare outside -0.13*** -0.126" * * R2 .22 .27 (4.98) (4.96) R2 adjusted .19 .24

Compare carrier 0.05* 0.02 Sum of squares (1.76) (0.743) regression 35.13 40.2

Manage info -0.03 0.001 Sum of squares (1.1) (0.05) residual 127.36 108.24

Union info 0.04 -0.013 F = 7.7 8.5 (1.5) (0.45) Signif F = 0.00001 0.00001 -

*Significant at 10 per cent; "significant at 5 per cent; *"significant at 1 per cent level, two-tailed tests.

associated with lower levels of satisfaction but just miss conventional levels of significance.

Conclusions Overall, the results suggest that previous behavioral research may have

paid too little attention to markets and other external conditions. The most general finding is that the traditional labor economic and industrial relations emphasis on markets and wage contours are good predictors of pay satisfaction. Freedman (1985) notes that employers are increasingly trying to establish bargaining norms that focus attention on circumstances at the firm. Our results suggest that employers may find it difficult to get away from union demands based on wages and settlements elsewhere and from traditional "pattern" negotiations in collective bargaining. The forces governing satisfaction are not necessarily beyond the control of the parties,


however. Information from management appears to play a role in shaping satisfaction, especially with pay, and helps explain why management has stepped-up communication programs, especially where there are attempts to change the work environment. In general, the role of information seems an important, albeit neglected, area in shaping worker attitudes and perceptions.

Two-tier pay plans also had an important-and surprising-effect on satisfaction, especially for pay. The greater satisfaction of workers in the lower-paid “B” tier is independent of any age or seniority effects and seems related to the fact that “B” scale workers use different and presumably lower-paid jobs as comparisons for judging the fairness of their pay. The greater satisfaction of “By’ scale employees may be temporary, however, because their comparisons will no doubt change as they become more like their colleagues in the “A” tier.

The results for changes in work and in the structure of labor relations represent what we believe are among the first attempts to identify the relationships between these important developments and job satisfaction. They clearly suggest that workers are much more satisfied with less supervision and with greater control over their jobs. Perceptions of work rule changes are associated with greater satisfaction with work, suggesting that such changes may not necessarily be viewed as “concessions” by workers, even though they are often portrayed as such. Perceived changes in schedules, on the other hand, do appear to merit that label, at least for pay satisfaction. One practical application of these relationships is that they may measure economists’ concern with compensating differentials-how given items may substitute in the worker’s eyes for higher pay-better than any previous measures.

The results presented here are obviously limited in that they come from only one case and one point in time. Additional research that examines effects over time, especially those associated with the changes in industrial relations, would be very useful, as would case-study research that provides a more complete picture of how the programs implementing these changes operate.

Changes in the organization of work and in the structure of labor relations have more complex effects on attitudes than popular opinion may suggest. Developments such as changes in work rules are often seen as management victories in bargaining with employees, but they are also associated with greater worker job satisfaction; greater worker participation and involvement in jobs are often thought of as union demands, yet they seem to improve worker attitudes toward their jobs, which may benefit the firm.

Satisfaction, Wages, and Labor Relations I 7 1

Appendix The questions used in the survey and the scales formed from them are

available from the authors. The factor analysis performed for the scales demonstrated convergent and discriminant validity (factor scores and reliability results are available from the authors). Oblique rotations were used because of the possibility that the factors might be correlated due to common method variance or substantive relations between variables. The oblique rotations yielded a simpler structure than did orthoginal rotations. Unrestricted maximum likelihood factor analysis using Linear Structural Relationships produced results similar to those from the oblique rotations which used the DAPPFR program-Direct Personal Probabilities Function Rotation (see Finkbiener and Tucker [ 19781 for a description).

The appropriate number of factors for the scales was determined using parallel analysis which compares the eigenvalues for the real data with those generated from random data and calculates the difference between them. Where the difference converges to zero, the number of factors is a t its maximum (adding more factors would be the equivalent of adding random data). Results for the parallel analysis and the factor intercorrelation matrices are also available from the authors.

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