- Kyiv School of Economics
- Relationship between Your Personality and Your Salary Level
Your distinct pattern of thoughts, feelings, and behavior, your tendency to respond in a certain manner under certain circumstances, i.e. your personality, affects your wages. Research shows that if an employee chooses to behave non-selfishly and cooperatively with others in an organization, s/he tends to lose about as much in wages as an employee who is emotionally unstable and prone to psychological distress. Research also provides evidence to the fact that if you are open to new experiences and if you are an extravert, you tend to earn more than a person who is an introvert and who relies on traditional behavior. For their careers, employees are advised to take this into consideration as they chose their organizational behavioral tactics.
Have you ever wondered about relationships between personality and salary? If you have, this article will give you few ideas about what you can do to increase your job income level.
Historically, research on the relationship between individual characteristics and labor market outcomes focused on traditional human capital aspects such as education, job training, and job experience. Non-cognitive traits were for a long time not considered relevant for labor market success compared to the intelligence of a person, which was supposed to be the only factor directly related to individual productivity. However, this view has been quickly changing. There is growing literature that incorporates psychological and behavioral factors in analyses on labor market success, which shows that non-cognitive factors are as important as a person’s cognitive abilities. For example, a world-known US economist Dr. James Heckman and his collaborators have worked to incorporate non-cognitive skills into the economic analysis of individual achievement, with a conclusion that “personality, persistence, motivation, and charm matter for success in life” (Heckman, Stixrud, and Urzua, 2006). These and many other non-cognitive traits affect market success. “This represents an important shift in economists’ conception of human capital, moving beyond brains and brawn to incorporate a broad set of psychosocial capabilities” (Lundberg, 2017, p. 2).
Let’s now talk more specifically about such category of non-cognitive skills as human personality. What is personality? It may be defined as “the relatively enduring patterns of thoughts, feelings, and behaviors that reflect the tendency to respond in certain ways under certain circumstances” (Roberts, 2009). Few decades ago, psychologists developed and extensively evaluated a model of different personalities called the Big Five, which is accepted world-wide as a consistent construct for describing different personality traits and human differences (Lundberg, 2017). The Big Five includes the following personality traits: Openness to Experience, Conscientiousness, Extraversion, Agreeableness, and Emotional Stability. Academics argues that the Big Five are the “longitude and the latitude” of personality, by which all more narrowly defined traits can be categorized (Heckman, Kautz, 2012).
Let’s define each of the Big Five’s traits. According to American Psychology Association (Heckman, Kautz, 2012, p. 12):
Conscientiousness – “the tendency to be organized, responsible and hard-working”
Openness to Experience – “the tendency to be open to new intellectual, cultural and aesthetic experiences”
Extraversion – “an orientation of one’s interests and energies toward the outer-world of people and things rather than the inner world of subjective experience; characterized by positive affect and sociability.”
Agreeableness – “the tendency to act in a cooperative, unselfish manner.”
Emotional Stability – “predictability and consistency in emotional reactions, with absence of rapid mood changes.” Its opposite is Neuroticism: a chronic level of emotional instability and proneness to psychological distress.
Now we have arrived at the most interesting point of our discussion. Try to guess how these personality factors affect earnings. Do they affect wages in a similar way? Which of them increase earnings, and which ones have a tendency to decrease it? Is it possible to link personality traits with important labor market outcomes? It has turned out that it is.
This article uses data from research conducted in Germany, the UK, and the Netherlands. In Germany Agreeableness negatively affects wages by 2-5% (Braakmann, 2009; Denissen, Bleidorn and Hennecke, 2018). In UK employees with high Agreeableness trait experience about 4-6% reduction in pay in comparison with those who are low on Agreeableness all other things being equal (Heineck, 2007; Nandi and Nikoletti, 2014). Mueller and Plug (2006) and Judge, Livingston, and Hurst, (2012) also found the negative effect of Agreeableness. Similarly, Agreeableness is associated with lower wages in the Netherland (Nyhus and Pons, 2005).
Openness to Experience
Research conducted in the UK showed statistically significant positive effect of 9% between Openness to Experience and pay (Nandi and Nikoletti, 2014, p.3145). Heineck’s research (2007) found statistically significant positive relationships between wages and Openness for both females and males (0.14 and 0.06 respectfully). At the same time, research conducted in Germany (Braakmann, 2009; Denissen, Bleidorn, and Hennecke, 2018) didn’t find statistically significant relationships between wages and Openness to Experience.
In the UK, Extraversion provides a 5% pay increase (Nandi and Nikoletti, 2014, p.3137). In Germany, some researchers found positive relationships between Extraversion and wages with 3% effect (Denissen, Bleidorn, and Hennecke, 2018), while other researchers didn’t find any relationships (Braakmann (2009).
Conscientiousness personality dimension is positively associated with wages according to the research conducted in the Netherland (Nyhus and Pons, 2005). In the UK, Conscientiousness positively affects ages by about 4% (Heineck, 2007). At the same time, research conducted in Germany didn’t find any statistically significant relationships between these two factors (Denissen, Bleidorn, and Hennecke (2018).
In Germany Emotional Stability adds about 4% to salary while those high on Neuroticism lose about 3% of wages (Braakmann, 2009; Denissen, Bleidorn, Hennecke, 2018). Emotional Stability dimension is positively associated with wages in the Netherland (Nyhus and Pons, 2005). Employees high on Neuroticism in UK experience pay loss of about 6% (Nandi and Nikoletti, 2014).
What does this all mean? Although other personality traits effect wages differently in different countries, two traits (Agreeableness and Neuroticism, which is opposite of Emotional Stability) negatively affect wages in all countries where research was conducted. In general, low emotional stability and high agreeableness have been found to be negatively associated with earnings in all countries where research was conducted (Mueller and Plug, 2006; Heineck, 2011; Nyhus and Pons 2005). Other personality traits positively affect salary although do not show such unanimous affect in all countries as these two personality traits. The situation is understandable with the Neuroticism factor (a person who can’t keep his/her mood and temper.) But Agreeableness? Let’s go back to the definition of this factor described earlier. “The tendency to act in a cooperative, unselfish manner.” Isn’t it great quality? Isn’t it a quality which shows that a person thinks about the company and makes efforts to be a good team player? Aren’t such people those who create good value for the company? The answer to all these questions is Yes. We all want to work with people who act cooperatively and unselfishly. But there is cost to such behavior. As one of the researchers stated, “being nice does not pay” (Heineck, 2007, p.1). The person who exercises such quality loses in wages. This is a good quality, which deserves respect. But don’t think that you automatically will be financially rewarded for using this quality. In fact, you will not.
Where do we go from here? Career-wise, it is advisable to conscientiously choose your pattern of organizational behavior. Your organizational behavioral tactics need to take into consideration what you value most and what you want to receive. So, it is your choice.
- Braakmann, N. (2009). The Role of Psychological Traits for the Gender Gap in Full-Time Employment and Wages: Evidence from Germany. SOEP papers on Multidisciplinary Panel Data Research, No. 162.
- Denissen, J., Bleidorn, W., Hennecke, M., et al. (2018). Uncovering the Power of Personality to Shape Income. Psychological Science. 29 (1), 3-13.
- Hanushek, E., Schwerdt, G., Wiederhold, S., Woessmann, L.(2017). Coping with Change: International Differences in the Return to Skills. Economic Letters 153, pages 15-19.
- Heckman, J., Stixrud, J., Urzua, S. (2006). The Effect of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior. NBER Working Paper 12006.
- Heckman, J., Kautz, T. (2012). Hard Evidence on Soft Skills. NBER Working Paper Series, Working Paper 18121.
- Heineck, G. (2007) Does it pay to be nice? Personality and Earnings in the UK. LASER Discussion papers. Paper No. 3.pages 1-29
- Heineck, G., Anger, S. (2008) Returns to Cognitive skills in Germany. DIW Berlin. Discussion Paper 836.
- Lundberg, S. (2017). Non-Cognitive Skills as Human Capital. NBER Conference on Education, Skills and Technical Change, October 2015.
- Nandi, A., Nicoletti, C. (2014). Explaining personality pay gaps in the UK. Applied Economics, 46 (26), 3131-3150. DOI: 10.1080/00036846.2014.922670.
- Nyhus, E., Pons, E. (2005). The Effects of Personality on Earnings. Journal of Economic Psychology, 26, 363-384.
- Roberts, B., Kuncel, N., Shiner, R., Caspi, A., Goldberg, L. (2007). The Power of personality: The comparative validity of personality traits, socioeconomic status, and cognitive ability for predicting important life outcomes. Perspectives on Psychological Science 2(4), 313-345.