Firm Pay, Amenities, and Inequality

This National Bureau of Economic Research working paper investigates the relationship between firm-specific amenities, wage structures, and economic inequality. Authors Sydnee Caldwell, Ingrid Haegele, and Jörg Heining utilize discrete choice experiments embedded in a large-scale survey of German workers, linked with administrative records, to estimate how workers value non-wage benefits. By presenting workers with hypothetical job offers from real firms featuring randomized wages, the study identifies money-metric valuations for various amenities. The findings reveal that while amenity valuations vary significantly across different firms and demographic groups, a single index effectively captures these preferences. Crucially, the research demonstrates that amenity valuations are approximately orthogonal to firm wage premia, indicating that non-wage benefits do not offset wage inequality between firms. However, the study highlights that differences in how men and women value amenities contribute to explaining part of the gender wage gap. This analysis provides significant insights into labor compensation dynamics, suggesting that while amenities are important for individual job choices, they do not serve as a equalizing mechanism for broader wage disparities among firms, though they play a role in gender-based earnings differences.