Understanding Misperceptions of Occupational Incomes – An Empirical Analysis of Occupational and Individual Factors Based on Representative Survey Data

Authors – Timo Schnepf, Christian Ebner, Daniela Rohrbach-Schmidt.

Abstract :

Surveys show that there can be a clear gap between subjective perceptions of the social world on the one hand and objective reality on the other (cf. Rosling 2018; Duffy 2019; Gimpelson and Treisman 2017; Ciani et al. 2021). As a contribution to this strand of research, the aim of the present study is to describe and explain how people assess occupational incomes and how these assessments differ from the real world.

In general, occupational incomes can be judged correctly, overestimated or underestimated by respondents. We argue that misperceptions of occupational earnings are first, a function of specific occupational characteristics. For instance, the monetary value of an occupation may be overestimated or underestimated based on the actual income position of the occupation, its size, its actual and perceived working conditions (physical/emotional “hard work”, degree of autonomy) or its social composition (educational level, share of women, migrants etc.).

Second, misperceptions can be based on individual characteristics and the social position of the raters. For example, it can be hypothesized that income misperceptions are weaker with increasing levels of education and cognitive capabilities. Based on the reference group theory, raters may not only systematically misperceive their own income position (Cruces 2013; Karadja et al. 2017; Hvidberg et al. 2021), but also the income position of socially close occupations.

The analyses are based on representative survey data for Germany (year 2018). Around 9,000 People were each asked to estimate the income deciles for 5 randomly selected occupations (out of 402 in total). Estimated income values were compared to reported income data in a representative survey of employees (BIBB/BAuA Employment Surveys 2012, 2018 with 20,000 respondents each).

First descriptive findings and results from multilevel regression models (individuals nested in occupations) suggest that misperceptions are strongest at the edges of the actual income distribution: Wages from low income jobs are systematically and sizeable overestimated (about 3 deciles), wages from high income jobs are strongly underestimated (about 2 deciles). Further, we find high variability for occupational characteristics. For instance, do we find that occupations are assessed with higher accuracy, the higher their educational requirement level and the lower their physical working conditions. At the individual level, we do not find a sizeable effect for the educational level and cognitive capabilities. We do find, however, strong support for the reference group theory where individuals misperceive occupations from their own social strata the strongest.