Study finds job perks may be worth more than a raise

August 2, 2023 - 5:00am

A job’s paid time off and remote work option benefits could be worth a lot to American workers, University of Oregon research finds.

According to a paper published in the July issue of American Economics Review, workers might choose a job with a lower wage if it has better working conditions, such as paid time off, a flexible work schedule or lower physical demands.

In the paper “The Value of Working Conditions in the United States and Implications for the Structure of Wages,” the authors analyze survey data collected by the research organization Rand Corporation on how workers value working conditions, as well as reexamine wage gaps.

“If you look at the worst job on these dimensions compared to the absolute best, you would see that people would be willing to trade off about half of their wage,” said Kathleen Mullen, the corresponding author and an associate professor and Petrone Chair in Economics in the College of Arts and Sciences.

The authors examined a range of working conditions, including the option to choose the level of physical activity — such as sedentary, moderate or heavy — a relaxed or fast-paced environment, telecommute options, how one does work, the ability to set one’s hours, working individually or on a team, opportunities to serve one’s community, and paid time off.

The four other authors of the study are Nicole Maestas of Harvard University, David Powell and Jeffrey Wenger of Rand Corporation, and Till von Wachter of the University of California, Los Angeles.

Through a national survey conducted in 2015, the authors use participants’ current wages and working conditions as a reference point in creating hypothetical job profiles. Next, they had participants select their preferred job choice among a pair of hypothetical jobs with different wages and job attributes.

Analyzing participant responses and valuation of benefits, the authors estimated that the monetary value of 10 days of paid time off is equivalent to a 16.4 percent wage increase, setting your work schedule is equivalent to an 8.9 percent wage increase, and having a moderately physical job versus a heavy one is equivalent to 14.5 percent wage increase.

The willingness to forego wages for better working conditions increases with age. Workers ages 25-34 would trade 47.5 percent for better conditions, 53.5 percent for ages 35-49, 58.9 percent for ages 50-61 and 74.5 percent for ages 62-plus.

The research found that 20 percent of participants preferred a job with better conditions even if it offered a 40 percent lower wage.

From the data collected on participant preferences, the authors examined wage gaps among workers with different characteristics to see whether adjusting wages for the monetary value of working conditions affected any of these gaps.

For example, they found that the adjusted gender wage gap wasn’t as large as the unadjusted gap (though women still earn less than men on average). After including the value of working conditions, women have 17 percent lower wages compared to men, which is a 24 percent reduction from the raw wage gap.

“The gender wage gap got slightly narrower,” Mullen said. “This is because women tend to have jobs with lower physical demands, more flexible schedules and more paid time off, which they value more than men.”

The authors do provide a caveat for that insight, saying that based on previous research cultural factors such as child care expectations likely influence American women’s work availability and in turn their preferences for features like flexible work.

Despite survey data being collected in 2015, Mullen speculated that such nonwage benefits could be worth even more now, especially the ability to work from home and schedule flexibility, since the widespread labor market disruptions due to the COVID-19 pandemic.

“If we were to do it today, you might even see bigger valuations on telecommuting and maybe schedule flexibility as well,” Mullen said.

— By Henry Houston, College of Arts and Sciences
—Top photo: UO research finds that perks like being able to work from home are highly valued by many employees