Applied Micro Lunch Seminar, Manudeep Bhuller, University of Oslo

Speaker

Manudeep Bhuller, University of Oslo

Manudeep does great work in labor (e.g., search, learning, methods), the economics of crime, and other areas. He'll be presenting on worker amenities.

Title

Pay Beliefs and the Amenity-Pay Tradeoff

Abstract

We provide experimental evidence on how access to explicit pay information affects individuals' job choices and their tradeoffs between pay and workplace amenities. At baseline, individuals in our study sample have biased beliefs about starting salaries and the association between pay and workplace amenities offered in the market. Compared to the actual compensation, individuals on average underestimate starting salaries by 13.2 percent, yet perceive high-amenity jobs to offer substantially higher pay. When randomly faced with choice scenarios featuring explicit pay information, individuals choose not only jobs with higher pay, but also select job packages that on average contain fewer workplace amenities (e.g., flexible working hours). Our evidence shows that access to pay information affects the tradeoff between pay and workplace amenities, and suggests that the welfare impacts of pay transparency policies may go beyond the impacts on realized pay. Our findings reflect that exposure to pay information substantially reduces biases in individuals' pay beliefs and increases the precision of their pay beliefs.