Working for a third sector organisation significantly increases life satisfaction over the lifecourse

New research has shown that private companies would have to pay their employees an extra £22,000 per year to match the life satisfaction levels that third sector employees already have.

Using data from 12,786 private sector workers and 966 third sector workers who participated in the British Household Panel Survey, the predecessor to Understanding Society, Professor Martin Binder at Bard College Berlin says the ‘shadow price’ of working in a non-profit organisation is roughly £22,000 per year (with average income in the sample at £27,000 per year).

The concept of ‘shadow price’ was explained by Professor Binder as follows: “Consider two identical people. One starts working in a non-profit organisation and becomes happier. An equivalent person in a private firm would need to be paid around £22,000 extra to increase their happiness to the same level the non-profit working person has.”

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The research was based on BHPS participants’ information on job and income, as well as measuring participants’ overall wellbeing and job satisfaction levels. The longitudinal data was captured between 1996 and 2008.

There have been related studies but these were interested mainly in third sector workers’ job satisfaction.

Professor Binder said, “The main novelty about my study is that it focuses on the global life satisfaction of third sector workers, not just satisfaction with their job. This is important because you could be very satisfied with your job but work a lot and hence be dissatisfied with your private life (think of entrepreneurs).”

Why was longitudinal data needed for this work?

Professor Binder said, “Understanding Society (and the BHPS) is a great dataset because it covers so many diverse individuals and it asks so many different questions of them, repeatedly at that! And since it is a big and general survey, as a researcher I do not have to worry that the respondents outguess the aim of my study and answer accordingly.”

What impact could this research have?

Professor Binder said, “The study nicely shows how irrelevant money can be for our life satisfaction compared to factors such as having a meaningful job. This in itself is valuable information for all of us when next we deliberate whether a moderate pay raise would be worth working at something that does not stir passion in us.”

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