In modern labor markets, wages alone fail to capture the full value workers derive from their jobs. Non-wage job attributes, ranging from flexibility and job security to stress levels and workplace culture, play a crucial role in determining overall job quality and utility. Measuring these intangible “amenities” has long posed a challenge for economists. In this paper, the authors address this challenge.
The authors administer a survey to over 20,000 workers in Denmark who recently changed jobs. Respondents report their reservation wage: the lowest wage rate at which a worker would be willing to accept a particular type of job , the minimum pay they would require to return to their previous job, which serves as a measure of the total non-wage utility derived from their current position over their previous one. The authors combine these self-reported valuations with administrative labor market data to disentangle firm-specific amenities from match-specific ones (i.e., those arising from unique worker-firm pairings). They find the following:
- Non-pay job amenities vary widely across firms and sectors, with higher amenity values concentrated in public and education sectors and associated with flexibility, security, benefits, and social impact. These values correlate with indicators like firm size and PageRank (an algorithm used by Google Search to rank web pages), validating the authors’ empirical approach.
- Higher-paying firms tend to offer worse overall non-wage amenities despite providing better perks and flexibility. On average, a 10% wage increase is accompanied by a 5% decline in amenity value, with only 0.7% of that attributable to firm-wide characteristics and the remainder driven by match effects: the unique, job-specific value that arises from the interaction between a particular worker and a particular firm, beyond what can be attributed to the characteristics of either party alone between workers and firms. Notably, accounting for amenity effects meaningfully attenuates the gender wage gap in pay premia.
- Embedding the empirical findings in a structural job search model shows that amenities significantly offset the advantages of high wages. Over half of the wage advantage is neutralized by worse amenities, and variation in worker wages overstates variation in their job quality by about 50%.
Many aspects of a job beyond pay matter deeply to workers. These results underscore the importance of incorporating non-wage amenities into assessments of job quality and labor market inequality, and imply the need for richer models of labor market sorting and compensation.