Can Reference Group Theory Help Understanding Occupational Income Misperceptions in Germany?

Speaker: Timo Schnepf, Co-Authors: Daniela Rohrbach-Schmidt, Christian Ebner Abstract: The study asks how the German population perceives incomes in 402 occupations, to which degree they hold misperceptions, and what factors might cause them. Specifically, we test reference group theory, which suggests a systematic perception bias due to an individual’s social position in society. Further, we test how culturally shared images about occupational incomes and individual cognitive capabilities moderate such reference group effect. The study draws on two data sources. The Occupations in Germany survey applies a novel study design to measure income misperceptions. The data include around 45,000 ratings of occupational incomes from around 9,000 randomly sampled persons from the resident population in Germany 2017/2018. These assessments are compared to self-reported income information from the BIBB/BAuA Employment survey 2018. We find that individuals do not misperceive occupational incomes with a constant bias: many low-paid occupations are overestimated; many high-paid occupations are underestimated. The reference group effect only explains a specific share of the perception bias. Misperceptions are strongest when respondents assess occupations in their own socio-economic group. Occupations possessing an income image are assessed with higher accuracy, but the reference group effect remains stable. Last, income misperceptions are mostly independent of individual cognitive capabilities.