Role of psychological capital in the determination of happiness, job satisfaction and wage in the United States

The role of psychological capital variables, such as self-esteem, motivation, honesty, optimism and positive attitude, in the determination of the worker’s economic performance is not new in the economics literature. Numerous past studies indicate that the worker’s psychological capital endowments like human capital endowments affect his/her labor market performance positively, and should not therefore be omitted when estimating relevant equations related to economic performance. Recently, a new line of research in psychology, however, has started examining the effects of these psychological capital variables on subjective characteristics, such as job satisfaction, and life satisfaction or happiness. These studies claim that the worker’s psychological satisfaction in the workplace may be related to his/her personality and other character skills. Several other studies also claim that the worker’s happiness is positively correlated with his/her positive attitude. All these studies clearly indicate that psychological capital variables are significant covariates of not only objectively measurable wage and employment rates, but also the subjective satisfaction variables related to life and workplace. They should not therefore be omitted when estimating these equations.

The psychological capital variables considered in this study are self-esteem and positive attitude. We examine in this study the roles of these two variables separately in the determination of wage, job satisfaction and happiness. Using the US data from the National Longitudinal Survey of Youths, 1979 (NLSY79), we first estimate wage, happiness and job satisfaction equations with one of the psychological variables as an explanatory variable. This is exactly what most of the earlier studies have done. The current study, however, goes a step further. It extends the earlier research in an important direction by recognizing a possible simultaneous relationship among these four variables, and estimating these equations by an appropriate two-step procedure. Since computationally tractable compact formulas of the asymptotic variance-covariance matrices of these two-stage estimators that involve a mixture of four dependent variables with at least one as a binary variable are not available in literature, the study derives these formulas, and thus makes a further contribution to the literature. Our preliminary results indicate that, as predicted, both self-esteem and positive attitude not only influence wage, job satisfaction and happiness, but also are affected by them, especially in the mature adult sample. In the younger adult sample, the results are slightly different. These interesting results remain disguised when the simultaneous relationship proposed in this study is ignored.