Trust & job satisfaction: The effects of the crisis and culture in Europe

Kostas Katsanevas


Practically all form of human interaction whether it be in the marketplace, the greater economy or between friends, necessitates trust and reciprocity. This is the basic social cohesive, the lubricant of social systems at many levels, from friendships and marriages to business partnerships (Arrow, 1974). Conversely, dissolution and bankruptcy has been attributed to lack of trust in organizational spheres (Usikalu, Ogunleye, & Effiong, 2015; Arrow, pg 357, 1974) - the Enron scandal of 2001 being one famous example.


Trust, as defined by a behavioural perspective can be seen as a psychological state or behavior in which people put themselves in a vulnerable position, being exposed to exploitation by another (Hardin, 2002). Moreover, this vital human capacity to endure vulnerability, has serious implications on subjective well being (SWB), as well as economic performance.


Associated closely to the workplace, Schockley-Zalabak linked trust with overall employee job satisfaction and perceived organizational effectiveness (Shockley-Zalabak, 2000). Furthermore, there is a vast array of literature that points towards a positive association of aggregate economic performance and aggregate trust (Aghion et al., 2010). Considering the above implications, namely that trust can directly effect job satisfaction, it is reasonable to assume that during times of economic turmoil trust will play a vital role in any general subjective well being measure. In addition, it has been noted that cultural diversity in a globalized economy can create discrimination in economic transaction as a result of lack of trust between different nationalities (Bornhorst, Ichino, Schlag, & Winter, 2004), especially as investigated in this paper, between North and South Europeans.


H1

I contend that high levels of trust will contribute to higher levels of job satisfaction amongst Europeans. In short there is a positive association between general trust and Job Satisfaction.

H2

Turbulent times might suggest lower levels of trust which would pull down satisfaction with it, and thus it is believed that the economic crisis will effect the strength of association of general trust and Job Satisfaction negatively.


H3

The final hypothesis to be considered is that the strength general trust and job satisfaction relationship in the Southern countries of Europe, will be lower than for the Northern European countries.


Data & Method

The data for this analysis is derived from the 2006 European Social Survey (ESS Round 3) and the 2012 ESS (Round 6), which range from 25 to 29 different countries respectively. The ESS aims to map out the social and attitudinal tendencies of European citizens. This data is used to analyze the longitudinal and cross-cultural relationship between generalized trust and the subjective well being (SWB) measure of job satisfaction.


The ESS contains detailed information about job satisfaction as well as socio-demographic and attitudinal measures on generalized trust that will be modeled under OLS and OPM regression analysis. Considering the representative sample of over 50,000 participants, no significance test will be required. Moreover, ESS round 3 and 6 are the only two versions of the international survey that fit the requirements of the research in regards to the hypotheses, namely that one is before the European economic crisis while the other post-recession. Additionally, they contain within them both the dependent SWB variable of job satisfaction and all three trust variables required to properly assess the questions at hand.

In measuring job satisfaction the question given to ESS participants: All things considered, how satisfied are you with your present job?, can be reasonably linked to Diener et al’s iteration of subjective well being as a “broad category of phenomena that includes people’s emotional responses, domain satisfactions, and global judgments of life satisfaction” (Diener, Suh, Lucas, & Smith, 1999). More importantly, Timothy Judge and Ryan Klinger argue, “no research on subjective well-being can be complete without considering subjective well-being at work” (Judge, 2007).


Thus to categorize job satisfaction outside the domain of subjective well being would be like trying to make an argument without some integral context, reaching an incomplete conclusion. Job Satisfaction in the ESS ranges from ‘Extremely Dissatisfied’ defined numerically as 0, to ‘Extremely Satisfied’ represented as 10, creating an 11-point scale. Job satisfaction seems to be fairly homogeneous across countries and time (2006 – 2012), yielding a mean score of 7.2. Figure 1 – Job Satisfaction by Country, shows the levels of job satisfaction for each of the countries surveyed. Furthermore, as depicted in Figure 3, there is a standard deviation of 2 which suggests a moderate dispersion around the mean.

Following in the trendsetting footsteps of the US General Social Survey, the ESS has incorporated three attitudinal measures of trust in an 11-point scale (0-10) instead of three answering categories (‘yes’, ‘no’, ‘depends’) that the GSS uses. The questions measuring generalized trust are:


  1. Generally speaking, would you say that most people can be trusted, or that you can't be too careful in dealing with people? Please tell me on a score of 0 to 10, where 0 means you can't be too careful and 10 means that most people can be trusted;

  2. Do you think that most people would try to take advantage of you if they got the chance, or would they try to be fair;

  3. Would you say that most of the time people try to be helpful or that they are mostly looking out for themselves.

The reliability of these variables has been tested by Reeskens & Hooghe using multiple group structural equation modeling or MGSEM, and can attest to the ESS capacity, being of the “highest international standards for survey reliability” (2008). Consequently, it is required that the reliability of these variables be further tested using Cronbach’s alpha of internal consistency to asses just how closely related this set of items is.



The reliability analysis provides an alpha value of .78 which is above the threshold of .70 required in psychometric research, meaning that the three indicators are related enough to be combined into an index aptly measuring the concept of generalized trust. The aggregated generalized trust index creates a scale ranging from 0 to 30 suggesting that all three 11-point scale trust variables have been combined appropriately. As illustrated in Figure 2 – Trust Distribution by Country, generalized trust appears to be more heterogeneous than job satisfaction across selected countries and time, further yielding a mean score of 15.37. This might suggest that European citizens tend to have lower generalized trust as compared to job satisfaction.


Figure 1 & 2 - Job Satisfaction & Trust Distribution by Country

It has been contended by many affluent economists that the 2008 financial crisis is a result of massive failure in trust and confidence (Tonkiss, 2009). Nobel Laureate Joseph Stiglitz puts it bluntly, “Financial markets hinge on trust, and that trust has eroded” (Stiglitz, 2008). Amusingly in tandem, former US Labour Secretary Robert Reich argues that the “fundamental problem isn’t lack of capital. It’s lack of trust. And without trust, Wall Street might as well fold up its fancy tents.” (Reich, 2008).


By comparing the two ESS rounds between 2006 and 2012, this paper analyses the possible effects that the crisis had on the relationship between generalized trust and job satisfaction in Europe. The variable ‘postrec’ is created and the categories of 0 and 1 allocated to pre and post recession respectively. This is done in order to create a dummy variable for the purposes of interaction in the regression models.


The final independent variable is based on literature of cross-cultural differences in Europe. Particularly in regards to this continent, research has shown higher trust in Scandinavian countries and lower levels recorded in Southern Europe (Reeskens et al., 2008). Likewise, Bornhorst et al. used trust games to explore the dynamics of trust between Northern and Southern Europeans and found that Southerners are routinely discriminated against by their Northern counterparts (2004).


By dividing the continent into two regions, North and South, the final moderating variable is split into a reference and dummy, allocating the categories of 0 to North and 1 to South Europe. The particular selection of countries for these categories was tricky, due to the fact that countries like Italy and Greece (among others) were not in one or the other of two data sets. The continent was divided by Eurozone membership and separated into three countries for each category, the rest were relieved of duty,

  • North: Belgium, Finland and Germany

  • South: Cyprus, Spain and Portugal


The variable was named ‘south’ in order to make the reference clear for later interpretation.

This paper proceeds by using two analytical regression models, OLS and OPM. The SWB variable on job satisfaction is ordinal in nature, meaning that it is ranked on a scale of 0-10. There are a variety of different types of regression models that can be used to explore the perception of SWB by each participant, as it can be argued that participants might not all have the same understanding of said scale. By assuming that the ranking of job satisfaction is continuous we infer that a difference between categories 3 and 4 in a SWB measure equals the difference between categories 5 and 6.


This assumption requires the use of an ordinary least squares regression where the distance between a fitted line and the chosen data points are minimized, essentially being the sum of the squared residuals. Consequently, it is good practice in such analyses to assume the projection of a latent, unobservable SWB variable that tends to be distributed not in a strict ranked format. In this approach value in any categorical change is derived from values of the latent variable.


This approach typically is found in the Ordered Probit regression Model. These two models are used to first analyze the relationship of generalized trust with job satisfaction, then through the ‘postrec’ variable to investigate the effect of the recession on this association and finally the ‘south’, to explore the idea that cross-cultural differences might play a role in the association of interest.

Results

OLS

Recall that the general expectation is that the presence of generalized trust plays a key role in affecting individuals’ job satisfaction, during economic recession as well as across culture. The first OLS regression analysis has yielded results that reflect hypothesis 1, specifically, that generalized trust has an affect on job satisfaction. Hence we find first that individuals with higher levels of trust are significantly more satisfied with their jobs than those with lower trust levels.


Plainly put, there is a positive association between generalized trust and job satisfaction which according to OLS regression analysis is a significant relationship, yielding a p-value < 0.05. This suggests that there is a significant difference in job satisfaction between those individuals who tend to trust each other more and those who believe their peers to be less trustworthy. However, it seems that the generalized trust variable explains only 3.6% of the variance in job satisfaction, according to an r2 value of 0.036.


In the second OLS model, when moderating for differences in time (which in our case are the adverse effects of the financial crisis), regression analysis illustrates that the recession had a significant effect on the relationship between trust and job satisfaction. The results confirm the second hypothesis posited earlier. By comparing the 2006 data with 2012, I found that after the crisis the association of trust and job satisfaction decreased considering a negative beta coefficient. However, the association between generalized trust and job satisfaction remained positive, meaning that individuals with higher trust levels still had a significant difference in job satisfaction than those who trusted others less. Additionally, this new model yielded a higher r2 value of 4.2%, explaining a greater amount of variance in job satisfaction.

The final OLS model investigated the differences that culture can have between generalized trust and job satisfaction. Once again the results reflect the third hypothesis, namely that Southerners who are high on trust will be less satisfied with their job than their Northern counterparts who also believe their peer to be just as trustworthy. This seems to ring true according to OLS Model 3 which shows a negative beta coefficient after interacting with the ‘south’ variable while holding ‘postrec’ constant.


Although still a positive association after adding up the interaction beta score with the trust variable beta coefficient, generalized trust seems to have a smaller effect on job satisfaction in the South of Europe. This means that people in the South with high trust will have a lower job satisfaction than those in the North who have high trust levels. Furthermore, the model showed a significant relationship (< 0.05) in the effects of the interaction as well as an r2 value of 3.4%.

OPM

In the Ordered Probit Model analysis it is assumed that there lies a latent variable of subjective well being that is projected onto the ordinal job satisfaction variable. This is important to understand, as the model assumes that the 11-point scale is not continuous, meaning that the value derived from the difference of category 2 and 4 does not mean that a job satisfaction level of 4 is twice as high in value than category 2. This tends to mean that results will most probably vary from OLS models, however there shouldn’t be a large difference.


Additionally, the interpretation of the beta coefficients are different in that OPM infers the probability of subjects reporting to be in a likely category of SWB. Now, onto the investigation. In the case of OP model 1, where the basic relationship of generalized trust and job satisfaction was considered, OP analysis exhibited a positive and significant association between the dependent and independent variables. Specifically, participants high on trust are more likely to report a higher category of job satisfaction than those with lower general trust levels. This suggests, not unlike OLS model 1, that individuals with high trust levels are more satisfied with their jobs than those with lower trust in their peers.


Considering the second hypothesis using the variable ‘postrec’ as a moderator in the relationship between generalized trust and job satisfaction, OP analysis showed that there is a positive association still between trust and job satisfaction, however it has decreased. This means that individuals with high levels of trust are more likely to report a lower category of job satisfaction than those in the same category of trust after the crisis than before it in 2006. In other words, the effect of trust on job satisfaction is weaker after the crisis and is still significant. Finally, and again confirming the third hypothesis, OP model 3 shows that, when controlling for the crisis (accounting for the ‘postrec’ variable), the relationship in question is still positive but has decreased significantly.


This suggests that the cultural difference between North and South Europe plays a role in the strength of the relationship between trust and satisfaction in the workplace. More to the point, living in the South was associated with significantly lower levels of job satisfaction meaning that individuals in the South of Europe that tend to perceive others as trustworthy are more likely to report a lower category of job satisfaction than their Northern counterparts who have the same level of general trust. In conclusion it is important to point out another finding of this research. Since OLS and OPM regression analysis are quite similar in terms of significance of coefficients and direction of effect, job satisfaction as a SWB measure can be understood also as holding latent value on an interval scale and in a linear fashion, that is, as perceived by the ESS participants.

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