Labor Day: Compensation Evaluation & Endowment Effect
Introduction
As Labor Day approaches, many individuals take time to reflect on their work-life balance, compensation, and overall job satisfaction. It’s common for employees to reassess their worth and make decisions about their careers, with the hope of negotiating better pay or benefits. However, unrealistic expectations can often emerge, especially when evaluating compensation.
Just as the holiday provides a moment to rest and reflect, it’s also an opportunity to evaluate compensation in a balanced way. While past earnings and benefits are important, focusing too much on these “anchors” can lead to endowment effect bias, where individuals overvalue what they already have, making it difficult to objectively assess new opportunities or negotiate fair compensation.
What is the Endowment Effect?
The Endowment Effect is a phenomenon where an individual places a higher value on an object that they already own than the value they would place on that same object if they did not own it. This could be as a result of loss aversion which is a cognitive bias that describes why the pain of losing is psychologically twice as powerful as the pleasure of gaining. Hence, explains why individuals are less prone to trade an item of equal value for another if that item has been in their possession for an extended duration of time.
Case Study:
Singapore Scenario
A survey by Ipsos reveals that nearly 30% of Singaporean employees plan to leave their jobs within two years, with pay (45%), lack of recognition (32%), workload or work-life balance issues (32%), and limited career progression (28%) being the main reasons. Younger employees (18-24) are particularly concerned about workload, while older employees (55-65) value feeling appreciated as much as pay. Senior leaders and middle managers prioritize career development after salary.
The survey also highlights that only 62% of Singaporeans feel proud of their workplace, and 57% would recommend it as a great place to work—both below global benchmarks. Pride is lower among women (59%) and older employees (53%), while it is stronger among younger staff and those who feel their employer encourages open and honest feedback. The report stresses the need for companies to improve workplace culture, openness, and recognition to reduce employee attrition and boost engagement.
Key Takeaway: Nearly 30% of Singaporean employees plan to leave their jobs within two years, citing pay, lack of recognition, workload, and limited career progression as key reasons, with younger workers focusing on workload and older employees valuing appreciation.
Risk Management Strategies
1. Evaluate Current Compensation Packages
- Singaporeans should choose to evaluate their current compensation packages and determine whether it is suitable to them and what they feel is satisfactory for their career progression. By objectively reevaluating their compensation, their emotional attachment to the current one will diminish, and be more open-minded to career advancements.
2. Keeping An Open Mind & Taking Risks
- If the compensation package is not currently satisfactory and does not align with career progression goals, it is important to negotiate better packages either with your current firm or explore alternative options at other firms. This is important since although letting go of one employment opportunity to another is a big risk to take, it may be more rewarding than one may believe. To keep an open mind and actively seek opportunities and compensation that may benefit one instead of being influenced by the feeling of being “endowed” to your current job and letting go of it for another is critical for accomplishing financial targets as well as achievements in the long run.
3. Continue professional development
- It is important to continue professional development and gain certifications as well as any available education opportunities at hand to ensure your competitiveness in the increasingly saturated job market. With continuous and consistent professional development, it may be easier to negotiate for better deals in the future with employers and advance career goals at a faster pace.
Additional Resources
Articles & Studies: