The distribution of job satisfaction widened across cohorts of young men in the United States between 1978 and 1988, and between 1978 and 1996, in ways correlated with changing wage inequality. Satisfaction among workers in upper earnings quartiles rose relative to that of workers in the lowest quartile. An identical phenomenon is observed among men in West Germany in response to a sharp increase in the relative earnings of high-wage men in the mid-1990s. Several hypotheses about the determinants of satisfaction are presented and examined using both cross-section data on these cohorts and panel data from the NLSY and the German SOEP. The evidence is most consistent with workers' job satisfaction being especially responsive to surprises in the returns to observable skills, less so to surprises in the returns to unobservables. The effects of earnings shocks on job satisfaction dissipate over time.
