When workers choose jobs with predictable schedules, safer conditions, or greater autonomy, they are often paying a price: lower wages. In some cases, these hidden nonwage amenity trade-offs are considerable. Indeed, my research shows that these “amenity trade-offs” can account for as much as two-thirds of the gender pay gap.

In this column, I first introduce a new approach built upon my research to measuring these nonwage amenities trade-offs and then explain what the findings mean for both economists and policymakers seeking to understand and address persistent income inequality. I close with suggestions for how to foster a more equitable U.S. labor market that reframes how our nation values work, wages, and amenities.

A New Approach to Measuring Job Amenities

Economists have long recognized that workers care about more than wages. Surveys consistently show that people value features such as better scheduling options, safety, autonomy, and meaningful work. Yet preferences don’t always translate into prices.

Suppose men prefer coffee in the break room, for example, while women are more likely to want tea. As long as both options are equally costly for employers to provide, even large differences in preferences won’t contribute to the gender pay gap. Though simple, this example illustrates the importance of a broader question: When workers choose jobs with certain amenities, how much do they have to sacrifice in foregone wages?

Prior research has struggled to capture how much workers must trade off when choosing between wages and amenities. Traditional approaches often rely on wage comparisons across workers with different amenities but the same observable characteristics, such as education or experience, to estimate how much certain job features are worth to workers. But these methods assume that once economists control for observable factors, workers have roughly equal access to all jobs.

In reality, the U.S. labor market is segmented such that some jobs are better than others, and factors that are not easily observable such as search frictions or difficult-to-measure skills also influence which job options workers have.

Read the full article about nonwage amenity trade-offs by Alex Bell at Equitable Growth.