This summer, I learned I am getting a 2% raise as a result of the new CAO[1]. The 2% raise holds for everyone – professors and Ph.D. students alike[2]. So that sounds as if it’s pretty egalitarian. But that’s not entirely correct. A professor’s 2% is about double that of a Ph.D. student, because a professor’s salary is about double to begin with. Suppose that instead of “2% raise for all university personnel” the headline read “100 euro monthly raise for professors; 50 euro raise for Ph.D. students”. That reads quite a bit less egalitarian.
This is typical example of a framing effect. In the classic paper that put the concept of framing on the map, Amos Tversky and Daniel Kahneman asked people to imagine that a disease was to kill 600 people. Study participants then had to choose between policy options. In one experimental condition, policy outcomes were communicated in terms of deaths (“400 people will die”); in another they were communicated in terms of survivals (“200 people will be saved”). Even though the outcomes were equivalent, as both policies would result in 400 deaths and 200 survivals, if the policy option was framed in terms of deaths it was less often preferred. Psychologically, a scenario in which a minority of people survives is preferable to one in which a majority dies, even if the numbers are equal.
Communication of raises in terms of percentages activates egalitarian associations; communication in terms of nominal wages activates associations with Matthew effects, in which the rich-get-richer and inequality increases over time. Psychologically speaking, these are very different. So should we use raw euros to negotiate and communicate raises, instead of percentages? Economically speaking, there are arguments against such a policy. Inflation, for instance, is typically positive and sizeable. As a result, if we increase wages by the same nominal amount rather than by the same percentage, the rich will get poorer quickly, because their costs will grow faster than their salaries. Armies of economists study these processes (and could probably write a better column on the economic details) and I guess they would hold that equal nominal increases are misleading as well, because of the effects of inflation.
Returning to the psychological aspects, however, one could certainly argue that even if percentage raises have merit, communication in terms of raw euros would still be better. It would serve the purpose of maintaining awareness of the fact that our society has the curious habit of rewarding slightly different kinds of labor with wildly different salaries – differences that are often hard to rationalize. I am not so sure that I find it obvious that my salary should grow by more euros than that of Ph.D. students, let alone nurses, school teachers, and musicians. Percentage changes obscure that this is what we are actually doing. We do our psychological bookkeeping in euros and not in percentages; after all, prices of sandwiches, cars, and houses aren’t expressed as percentages of one’s salary either. Perhaps it is time that communication about labor conditions should be framed to reflect that basic fact.
[1] A binding agreement between unions and Dutch universities that prescribes labor conditions for all academics working at universities in The Netherlands.
[2] In The Netherlands, Ph.D. students are not actually students but employees. Their contract includes unemployment benefits, collective healthcare insurance, pension buildup, an office, etc.
This summer, I learned I am getting a 2% raise as a result of the new CAO[1]. The 2% raise holds for everyone – professors and Ph.D. students alike[2]. So that sounds as if it’s pretty egalitarian. But that’s not entirely correct. A professor’s 2% is about double that of a Ph.D. student, because a professor’s salary is about double to begin with. Suppose that instead of “2% raise for all university personnel” the headline read “100 euro monthly raise for professors; 50 euro raise for Ph.D. students”. That reads quite a bit less egalitarian.
This is typical example of a framing effect. In the classic paper that put the concept of framing on the map, Amos Tversky and Daniel Kahneman asked people to imagine that a disease was to kill 600 people. Study participants then had to choose between policy options. In one experimental condition, policy outcomes were communicated in terms of deaths (“400 people will die”); in another they were communicated in terms of survivals (“200 people will be saved”). Even though the outcomes were equivalent, as both policies would result in 400 deaths and 200 survivals, if the policy option was framed in terms of deaths it was less often preferred. Psychologically, a scenario in which a minority of people survives is preferable to one in which a majority dies, even if the numbers are equal.
Communication of raises in terms of percentages activates egalitarian associations; communication in terms of nominal wages activates associations with Matthew effects, in which the rich-get-richer and inequality increases over time. Psychologically speaking, these are very different. So should we use raw euros to negotiate and communicate raises, instead of percentages? Economically speaking, there are arguments against such a policy. Inflation, for instance, is typically positive and sizeable. As a result, if we increase wages by the same nominal amount rather than by the same percentage, the rich will get poorer quickly, because their costs will grow faster than their salaries. Armies of economists study these processes (and could probably write a better column on the economic details) and I guess they would hold that equal nominal increases are misleading as well, because of the effects of inflation.
Returning to the psychological aspects, however, one could certainly argue that even if percentage raises have merit, communication in terms of raw euros would still be better. It would serve the purpose of maintaining awareness of the fact that our society has the curious habit of rewarding slightly different kinds of labor with wildly different salaries – differences that are often hard to rationalize. I am not so sure that I find it obvious that my salary should grow by more euros than that of Ph.D. students, let alone nurses, school teachers, and musicians. Percentage changes obscure that this is what we are actually doing. We do our psychological bookkeeping in euros and not in percentages; after all, prices of sandwiches, cars, and houses aren’t expressed as percentages of one’s salary either. Perhaps it is time that communication about labor conditions should be framed to reflect that basic fact.
[1] A binding agreement between unions and Dutch universities that prescribes labor conditions for all academics working at universities in The Netherlands.
[2] In The Netherlands, Ph.D. students are not actually students but employees. Their contract includes unemployment benefits, collective healthcare insurance, pension buildup, an office, etc.
