Income Inequality and Subjective Well-Being: Assessing the Relationship

[We’re pleased to welcome author Ivana Katic of the Yale School of Management.  Katic recently published an article in Business & Society entitled, “Income Inequality and Subjective Well-Being: Toward an Understanding of the Relationship and Its Mechanisms,” co-authored by Paul Ingram of Columbia Business School. Below, Katic details the inspiration for the study:]

What inspired you to be interested in this topic? Inequality has always been a major topic in sociology. In the academic community and beyond, this interest in inequality simply exploded in the wake of the financial crisis of 2008, as well as the Occupy protests around the world. Despite the amount of attention that income inequality has been receiving in empirical studies across psychology, sociology, economics as well as political science, my co-author Paul Ingram and I noticed that the literature was still quite mixed in regards to the effects of income inequality. In fact, extant studies had found positive, negative and neutral effects of income inequality on the subjective wellbeing and happiness levels of individuals. This lack of a consensus, we thought, was quite interesting, especially in contrast to the commonly held belief that inequality has exclusively negative consequences for individuals, as well as communities—ranging from lowered trust and health and increased crime levels to, ultimately, lower overall wellbeing. We decided that the time was ripe to pursue a comprehensive study that would allow us to better understand how income inequality affects subjective wellbeing (SWB). Such a study would also allow us to better understand the channels through which income inequality may affect SWB. We set out to answer these important, and particularly timely questions, by constructing a rich cross-country dataset including 65 countries from 1995 to 201B&S_72ppiRGB_powerpoint.jpg1.

Were there findings that were surprising to you?Given the common notion that income inequality is always detrimental to human flourishing, we were initially surprised to see that income inequality had a strong and very robust effect on SWB in our analysis. On the other hand, this was not the first time a study had found a positive effect—so there was clearly precedent for our finding in previous literature on the topic. However, to be quite certain, we threw everything we could at our results in a variety of robustness tests (including different operationalizations of our key independent variable and our dependent variable, as well as a series of different estimation techniques). Our results never budged.

How might one use the study’s main finding of a positive main effect of income inequality on SWB to create policy? While our main effect suggests that decreasing income inequality may not increase SWB, we caution against using our study as justification for lowering taxes and increasing inequality. First, our results do not necessarily indicate that income inequality is never a negative for a variety of other life outcomes. Second, we cannot rule out that income inequality may increase beyond the range studied in our paper, and we similarly cannot guarantee that it would not have negative effects beyond that range. Third, in a separate working paper, we find that any changes in the level of income inequality are uniquely damaging to SWB, suggesting that fluctuating levels of inequality may be particularly psychologically taxing for individuals to adjust to.

However, our study has another way forward for policy. A particularly important aspect of our study is that it sheds light on the mechanisms of income inequality’s relationship with SWB. Specifically, we found that income inequality has more positive effects on individuals who are relatively better off, those that perceive the income generation process to be fair, and surprisingly, those that do not perceive a lot of social mobility in their society. It is with these mechanisms in mind that we suggest constructing policies that focus on increasing perceptions of fairness and reducing social comparisons to the superrich.

In terms of future research, we hope that our study paves the way for other work that might further unravel the complexity of income inequality’s effects. In particular, future scholars should continue to investigate how income inequality may impact individuals differently depending on who they are, and where they live. Finally, the role of organizations in affecting levels of income inequality (and consequently, SWB) is also a very promising area of study. Given the complexity of this social phenomenon, as well as its highly significant implications for policy, future work on all of these topics is direly needed.

Sign up to receive notifications about the latest published research from Business & Society.

Benefits of Starting Work Meetings On Time

[We’re pleased to welcome author Nale Lehmann-Willenbrock of the University of Amsterdam, Netherlands. Lehmann-Willenbrock recently published an article in the International Journal of Business Communication entitled, “Well, Now What Do We Do? Wait . . .:A Group Process Analysis of Meeting Lateness,” co-authored by Joseph Allen. From Lehmann-Willenbrock:]

What inspired you to be interested in this topic? One earlier study had shown that meeting lateness is very common in the workplace. Meetings begin late all the time, even though wasting time is typically a red flag for organizations. Lateness can be quite a nuisance for th4330781173_db539e781c_z.jpgose who are punctual. We also know this from our own meetings – it’s just so annoying when you’re on time, but others are late and you are kept waiting, thus wasting precious work time. But in addition to annoying employees individually, there might also be negative effects in terms of the group as a whole. So we were curious what lateness does to the group processes in the actual meeting itself.

Joseph Allen set up a meetings lab, with the purpose of focusing on meetings as a research phenomenon. This gave him the opportunity to manipulate different variables, including different levels of meeting lateness (something that would not be possible when studying actual meetings at work).
During our collaboration on previous projects, we increasingly looked into the fine-grained interaction dynamics that make up a good meeting, or a terrible one.  We have conducted several studies on group dynamics within meetings until now, and find again and again that what happens in the actual meeting matters a great deal to meeting satisfaction and effectiveness.
So the connection between lateness and group dynamics seemed like a logical connection to draw in our research.

Were there findings that were surprising to you? Overall, our findings are really quite aligned with our hypotheses. As expected, groups that begin their meetings late are less effective in terms of discussing problems in depth, generating ideas and solutions, and showing support for one another, in comparison to groups that meet on time. These findings hold when we control for meeting length. This means that the differences in these groups’ interaction patterns and the quality of their problem solving is actually due to the meeting lateness (rather than the shorter time that is available when a meeting starts late).

What is somewhat surprising though is that we found quite substantial effects of lateness in terms of derailing group dynamics and deteriorating problem solving, even though these were ad-hoc laboratory groups. Think about how much stronger the effects might even be in the real workplace, where you have to continue working together beyond the meeting.

How do you see this study influencing future research? In terms of future research, there are a host of potential other negative outcomes of lateness both within and after the meeting. We think that lateness may not just derail group dynamics and visible behaviors, as we have shown in this study, but also individual emotional experiences, for example. Moreover, the negative effects of meeting lateness may linger and carry on into employees’ work days, long after the meeting has passed.

Another factor to consider in future research concerns nonverbal expressions during meetings that start late. We noticed in our video data that group members’ nonverbal expressions became quite pronounced as the lateness period continued and they got more annoyed. Again, such expressions may be even stronger in real meetings, rather than the research lab. In this context, future research can also investigate how lateness affects the emergent group mood in the actual meeting itself.

Moreover, individual lateness to meetings might be an indicator or implicit measure of other negative employee attitudes and behaviors. For example, employees who tend to show up late for meetings might be unsatisfied or frustrated with their jobs more generally. Lateness to team meetings could also mean that the team does not feel committed to their shared task, or that the team experiences interpersonal conflict. Future research can examine these possibilities.

For practice, put simply, our results suggest: Don’t be late to your meetings, people! Leaders especially should not be late, as they are often seen as behavioral models for their employees.
Everyone should be wary of the negative consequences of meeting lateness, and therefore plan ahead so meetings can begin on time.

Sign up for email alerts through the journal homepage.

Clocks photo attributed to Desmond Williams  (CC).

Call for Papers: Business & Society’s Special Issues

BAS_call

Business & Society is currently accepting manuscripts for two special issues.

Please click here for details on how to submit to “Modern slavery in business.”

Please click here for details on how to submit to “Corporations, capitalism and society.”

Stay up-to-date with the latest research and sign up for email alerts today.

American Slaughterhouses: The Meatpacking and Methamphetamine Relationship

[We’re pleased to welcome author Josh A. Hendrix  of RTI International, Research Triangle Park. Hendrix recently published an article in the Organization & Environment entitled “American Slaughterhouses and the Need for Speed: An Examination of the Meatpacking-Methamphetamine Hypothesis,” co-authored by Cindy Brooks Dollar of the University of North Carolina at Greensboro. From Hendrix:]

What inspired you to be interested in this topic? A few years ago, I was teaching an undergraduate Sociology of Social Deviance course.  In class one day, we were reflecting on an article we had just read and were bringing up examples of how deviant behavior can be influenced by structural or cultural factors that go beyond individual psychopathology.  I brought up an example I had recently come across in Eric Schlosser’s Fast Food Nation; specifically, the notion that methamphetamine use can be a re122874634_b6873ca52d_z.jpgaction to social pressures for productivity within competitive Western societies.  Although the idea is provocative and made for a good example, I realized that there was no empirical research that could show whether there is in fact a relationship between animal slaughter and methamphetamine use in the United States.  I recruited one of my colleagues who I knew had the right skill set for this type of project:  an open, critical, and creative mind, and strong analytical skills, and the project really developed from there.

Were there findings that were surprising to you? We were surprised to find any support for Schlosser’s hypothesis that there is a connection between the meatpacking industry and methamphetamine use, simply because the idea is so radical and far out there.  At the same time, it was surprising that the relationship did not hold when breaking down our analysis by different types of meat.  This suggested to us that the relationship is more complex than we had first imagined but also made us realize that more research on this topic using different types of methods was necessary.

How do you see this study influencing future research and/or practice? We would love to see additional work on this topic, and especially a project that uses qualitative methods to elaborate on why methamphetamine may be used by slaughterhouse workers.  Alternatively, a study that examines methamphetamine usage prior to, and following the construction or relocation of slaughterhouses would be interesting and informative.

Stay up-to-date with the latest research from Organization & Environment–sign up for email alerts through the homepage.

Slaughterhouse photo attributed to benketaro (CC).

Family Firms and the Impact of Incentive Compensation

[We’re pleased to welcome authors James Chrisman of Mississippi State University, Srikant Devaraj of Ball State University, and Pankaj Patel of Villanova University. They recently published an article in Family Business Review entitled “The Impact of Incentive Compensation on Labor Productivity in Family and Nonfamily Firms.” From Chrisman, Devaraj, and Patel:]

 Family firms are thought to face a managerial capacity constraint owing to the preference of hFBR_72ppiRGB_powerpoint.jpgigh-ability job candidates from outside the family to seek employment with non-family firms, which usually offer higher compensation and more lucrative career opportunities. In our paper, we theorize that incentive compensation can ease this constraint by signaling the attractiveness of working in family firms, thereby increasing the average ability of a family firm’s workforce. We therefore hypothesize that incentive compensation will reduce the productivity gap between family firms and non-family firms.

We are interested in this topic because much of the focus in the literature on non-family employees in family firms deals with issues associated with alignment of interests after workers have been hired. Few studies deal with the pre-employment problem of adverse selection, which is primarily (but not entirely) an issue of worker ability rather than worker effort. We also wanted to emphasize that if job candidates seek employment with firms that are compatible with their self-interest, adverse selection can exist even in the absence of an opportunistic pursuit of self-interest (or in the presence of stewardship motives).

Bounded rationality and information asymmetry make judging the ability of potential employees difficult for the owner-managers of both family firms and non-family firms (and even for the potential employees themselves). However, when the labor pool available to family firms becomes attenuated because high-ability workers self-sort according to a preference to work in non-family firms, the adverse selection problem facing family owner-managers becomes even greater.

Incentive compensation will be more valuable for high-ability job candidates than it will for low-ability job candidates because the former are most likely to benefit from it. Thus, incentive compensation signals performance will be rewarded, which may help alleviate the adverse selection problem facing family firms. Our empirical analysis of a matched sample of over 200,000 small and medium-sized firms obtained from a U.S. Census survey supports our contentions. Findings indicate that the productivity of family firms that provide incentive compensation increases at a greater rate than the productivity of non-family firms that provide incentive compensation (compared, respectively, with family and non-family firms that do not offer incentive compensation).

We hope that our paper will inspire further work on the adverse selection problem facing family firms. We also hope that our paper will lead researchers to focus more on how bounded rationality and information asymmetry, rather than simply opportunism or the lack thereof, influences the behavior and performance of non-family employees in family versus non-family firms.  In this respect, we suggest that the presence of bounded rationality and information asymmetry make incentive compensation and monitoring valuable tools in family firms regardless of the composition or proclivities to behave opportunistically of the workforce.

Sign up for email alerts so you never miss the latest research. 

Enhancing Student Learning Through Scaffolded Client Projects

[We’re pleased to welcome author Elizabeth Tomlinson of West Virginia University. Tomlinnson recently published an article in Business and Professional Communication Quarterly entitled “Enhancing Student Learning Through Scaffolded Client Projects.” Below, Tomlinson outlines the inspiration for this study:]

As a Teaching Assistant Professor, much of my research tends to focus on advancing the Scholarship of Teaching and Learning (STL). I want to ensure that the pedagogical practices I’m using are meeting my students’ needs, as well as advancing pedagogy within the disciplinBPCQ_v77n1_72ppiRGB_powerpoint.jpge. Simultaneously, I want to ensure that the clients who graciously allow my students to work with them have a great experience and receive worthwhile materials that they can actually use. I am not an instructor who is comfortable with the status quo— as a business school professor, I’m continually looking for ways to enhance student readiness for the workforce while improving students’ experiences in my courses. This impetus led to my systematic investigation into what ways client projects (CP) are currently being used across the business communication course, as well as the best practices in place to teach those types of projects. The survey data from other instructors pointed to a need for a model for teaching CP, which the article demonstrates.

I was first introduced to the CP concept in conversations with Gerry Winter, one of my mentors at Kent State. She explained how she had used the projects in the past, and also provided some advice on how to fit these types of projects within the framework of technical and business communication courses.

Regarding the findings for this project, one of the surprises to me was the differences between the actual problems instructors using CP face and the problems instructors not currently using CP fear. I hope that the article speaks to both of these audiences. In the future, we should continue to critically examine our pedagogical practices—it’s important to bring our knowledge of good research practices into the classroom to examine how we plan and deliver our courses, while continually assessing how to teach more effectively.

Stay up-to-date with the latest research and sign up for email alerts today!

 

Case In Point: A For-Profit Model for Social Entrepreneurship

Is it possible for social entrepreneurs to improve the lives of others and make a profit? For Sanergy, a startup dedicated to making hygienic sanitation accessible, affordable, and prosperous for those in developing countries, the answer seems to be yes.

The story of this startup— now an entrepreneurship venture seeded by grants from the likes of USAID, MIT, and Berkeley, to name a few—is covered in Sanergy: Using Social Entrepreneurship to Solve Emerging Market Problems, a case study from SAGE Business Cases. Using Sanergy as an example, case author Carole Carlson discusses the fundamentals of social entrepreneurship and how early stage entrepreneur ventures can evaluate expansion and new market opportunities.

connection.jpg

Delving further into these topics, we interviewed Professor Carlson for our inaugural post in the new Case In Point series. Drawn from our business case collection and containing insights from thought leaders in business and management, posts from this series will be published monthly. Read on to see Professor Carlson’s interview and check back next month for a new installment.

Carole Carlson is the MBA Program Director and a Senior Lecturer at the Heller School for Social Policy and Management, Brandeis University.

  1. The case you wrote outlines an early stage, for-profit venture that addresses a real social need in a developing country. In your opinion, what are the top three takeaways for other budding entrepreneurs with a social mindset?

I think that the major takeaway is that it is possible for an entrepreneurial team to use out-of-the-box thinking to innovate and develop new ideas.

A second takeaway is that not all social problems need to be addressed by non-profit organizations.

Finally, at Sanergy, as in so many other places, entrepreneurial startups can be really challenging, and sustained focus and a committed high quality team are essential to success.

 

  1. How does the application of social entrepreneurship in the for-profit world differ from applications in the non-profit world? Have you seen a growth in for-profit social entrepreneurial ventures?

There are a number of differences, but perhaps the most important one is that for-profits and nonprofits usually access very different funding.  In short, they play in different capital markets.  And the best organizational approach typically depends on the organization’s business model and scaling ambitions.

  1. How does social impact measurement factor into social entrepreneurship?

In my view, measurement is essential.  Social entrepreneurs, whether working with for-profit or nonprofit organizations, are accountable to their stakeholders – and this requires transparent measurement of their results.  That said, fast-moving entrepreneurs also need to be pragmatic.  It would not make sense for a social venture, for example, to spend half of its resources measuring results.  The entrepreneurs need to focus on the most important indicators.

  1. How pervasive is the teaching of social entrepreneurship across your campus? What level of interest do you see from students?

We see a real groundswell of interest.  For example, this past semester we hosted the Heller Startup Challenge, which focused exclusively on mission-driven startups, and a regional competition for the Hult Prize.  Both graduate and undergraduate students are drawn to concepts where they can grow as entrepreneurs while making a difference in society.  The Heller MBA at Brandeis focuses squarely on students that want to explore their interest in social justice while receiving a rigorous business education.

Learn more by reading the full case study, Sanergy: Using Social Entrepreneurship to Solve Emerging Market Problems, from SAGE Business Cases, open to the public for a limited time. To learn more about SAGE Business Cases and to find out how to submit a case to the collection, please contact Rachel Taliaferro, Associate Editor: rachel.taliaferro@sagepub.com.

 Follow SAGE Connection here on WordPress!