Factors Affecting Net Income: A Quantitative Analysis

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Quantitative Analysis
Abstract
An indication of one’s effort in work has been for long time been thought to be reflected in the
individual’s net income. In this paper, we explore several factors such as height, sex, ability to
read (education) as well as parental social class and how they are related to net income. After
using 3 regression models to fit the independent variable net income against other response
variable in the dataset we conclude that there is a relationship between height, sex and ability to
read and one’s net earnings while there is no relationship between parental social class and net
income.
Key words
Elaboration framework, Regression, socioeconomic status

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Quantitative Analysis
1. Introduction
1.1 Background information
Since the age of industrialization and even well before that, there have been curiosity to
realize what characterizes the pay that a given employee gets. In a salary survey conducted by
Zabel (2015) to determine what kind of factors influence salaries, several factors such as level of
education, overtime working and skills are proposed. For instance, in the study outcome, a job
whose position is hardest to fill attracted higher pay compared to that whose market is saturated.
Another research conducted in the mid-1990s indicated that there was a general salary gap
between male and females (Aizer, 2010), this therefore, suggests that sex is another factor that is
likely to cause salary difference.
1.2 Purpose of study
The purpose of this study is to:
i. Determine whether tall people earn more than others
ii. Determine if one’s ability to read, sex, parental social class as well as height do influence
earnings of an individual
1.3 Problem statement
From the purpose of the research, the problem is therefore to examine the factors that affect
earnings, i.e. “Is there a relationship between salary and factors such as height, sex, ability to
read and social class?”

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Quantitative Analysis
1.4 Research questions
At the end of our research, we need to answer the following three questions:
 Does height influence an individual’s net earnings?
 Is there a relationship between reading ability, sex, and parental social class?
 Is there a relationship between reading ability, sex, parental social class, and height?

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Quantitative Analysis
2. Literature Review
2.1 Social class stratification
In about the middle period of industrialization, around 1851 in Britain, there begun an
exercise to classify the British population according to occupation and industry (Rose, 1995). In
general, the population was stratified into the following classes:
i. Professional occupations
ii. Managerial and Technical occupations
iii. Skilled occupations i.e. “Non-manual” and “Manual”
iv. Partly skilled occupations
v. Unskilled occupations
Therefore, classification according to social classes occurred among working persons and has
become the basis of societal class stratification.
2.2 Parental social class
Erola and Lehti (2016) in their social paper on social stratification and mobility argue that,
“...despite relatively high degree of equality of opportunity in most of the developed countries,
family background still influences inheritance of social classes.” As such, the socioeconomic
status tend to influence each other, i.e. education, class and income (Crowford and Erve 2015)
2.3 Sex (Gender and earnings)
In a research on gender and income disparities, Ruel and Hauser (2013) note that there is an
identifiable income gap between male and female. More especially, there is a large wealth