1. The Value of Working Conditions in the United States
Kathleen J. Mullen, RAND
Joint work with Nicole Maestas, David Powell, Till von Wachter and Jeffrey Wenger
RRC Annual Meeting
August 4, 2017
Funding from Sloan Foundation and MRRC/SSA gratefully acknowledged.

2. The Quality of Employment
Qualitative evidence of a gap between the jobs older workers want and the jobs available to them (e.g., Pitt-Catsouphes et al., 2015)
Older workers say they desire: flexibility, meaningful work, pay and benefits, opportunities for advancement, supportive work environment, opportunity to gain transferable skills
But do these gaps have quantitatively important effects on labor force participation?
How important are working conditions?

3. Overview
We conducted a series of Stated Preference choice experiments using the RAND American Life Panel to elicit valuations of job attributes
We present estimates of total valuations based on incidence and compare to nominal wages to assess the importance of working conditions
We also use these valuations to adjust wages to account for different working conditions in assessing different wage gaps
Gender, Race, Education and Age

4. What Are Stated Preferences?
Provide hypothetical choices defined by observable attributes and prices
Because observe full choice set, possible to estimate importance of each attribute relative to price
Stated preferences have provided valuable evidence:
Environmental policy (Carlsson and Martinsson, 2001)
Consumer preferences (Revelt and Train, 1998)
Labor supply (Kimball and Shapiro, 2010)
Retirement decisions (Van Soest and Vonkova, 2014)
Long-term care (Ameriks et al., 2015)
CHECK REDUNTANT W/ DAVID?

5. Stated Preferences Research
Advantages:
Observe full choice set
Can account for differences across individuals
Possible to study behavior in counterfactual situations
Disadvantages:
No incentive to choose accurately
Salience of options may differ from similar choices in real world
CHECK REDUNDANT W/ DAVID?

7. Stated Preference Estimates v. Compensating Differentials
Paid Time Off
Flexibility
Physical Demands
Meaningfulness
Autonomy
Pace
Training
Telecommute Option
Hours
Work with Others
Note Comp Diff/OLS estimates multiplied by -1 to put on same scale as SP—i.e., valuation. Interpretation of SP estimates: workers willing to give up 5.8% wage to get option to telecommute. Comp diff estimates are mostly wrong signed—e.g., you would have to give people 24.3% wage to get them to accept the option to telecommute.

8. How much do workers value working conditions overall?
To estimate the value of working condition, we plug estimates into utility function, equate utility with and without condition, and solve for amount that leaves worker indifferent
We estimate, on average, workers value the 10 working conditions we study here collectively at 64% of their wage
How does this vary by group?

9. Effects on Wage Gaps

10. Effects on Wage Gaps

11. Effects on Wage Gaps

12. Effects on Wage Gaps

13. Effects on Wage Gaps

14. Effects on Wage Gaps

15. Amenity valuation differences driven by Differences in Preferences

16. Conclusion
Stated Preference estimates imply, on average, workers value the 10 working conditions we study here collectively at 64% their wage
Incorporating value of working conditions narrows gender wage gap, but widens gaps by race, education and age
Valuation differences driven mainly by differences in preferences not incidence
How to encourage older workers to stay in the labor force?
Our results suggest understanding preferences for working conditions—not just incidence—is key.

17. Backup Slides

18. Experimental Design
Each respondent is first surveyed about their current/most recent job
Then asked to choose their preferred job given a hypothetical choice set, 10x
Job characteristics and wage are benchmarked to:
For the first 8 pairs: their current/most recent job
For the last 2 pairs: a common job observed among older workers nearing retirement
For each choice, 2 dimensions are randomly chosen (w/o replacement) to vary, plus the wage
Wages are multiplied by a normally-distributed random variable with mean 1 and variance 0.1

19. How do people value these dimensions?
Assume an indirect utility function: V(W,N)=α+βW+N´γ+ε,
where W=wage, N=nonwage char.
Assuming a set of possible job offers J, the probability of choosing job A is: P(V(WA,NA)>max over all V(W,N))
We don’t observe J in real life but we can simulate job choices to estimate β and γ using stated preference analysis

20. Stated Preference Analysis
Conduct a series of experiments where we ask people to choose between jobs.
The probability of choosing between two jobs A and B is:
P(job A>job B)=P(V(WA,NA)>V(WB,NB))
=P(β(WA-WB)+(NA-NB )´γ +εA-εB>0)
Assuming a distribution for ε1-ε2, e.g., normal, then we can estimate β and γ by maximum likelihood

21. Characteristic SP Comp Diff Excluded Category
Full Time
0.049***
-0.323***
Part Time
(0.012)
(0.075)
Set Own Schedule
0.094***
-0.015
Schedule set by manager
(0.004)
(0.034)
Telecommute? Yes
0.058***
-0.243*** No
(0.042)
Moderate Physical Activity
0.201***
-0.072
Heavy Physical Activity
(0.006)
(0.055)
Sitting
0.165***
-0.221***
(0.056)
Relaxed
0.060***
0.187***
Fast-Paced
Choose How do Work
0.051***
0.027
Tasks well-defined
(0.049)
10 days PTO
0.167***
-0.211***
0 Days
(0.066)
20 days PTO
0.237***
-0.364***
(0.063)
Team-Based, Evaluate Own
0.082***
0.025
Team-Based, Evaluate Team
(0.044)
Work by Self
0.097***
0.044
Training Opportunities
0.057***
-0.085**
Already have skills
(0.039)
Frequent Opportunities to serve community
0.044***
0.003
Occasional Opportunities to serve community
(0.036)
Difference in Log(Hours)
0.071***
0.301***
(0.014)
(0.081) N
28,080
1,901
Note Comp Diff/OLS estimates multiplied by -1 to put on same scale as SP—i.e., valuation. Interpretation of SP estimates: workers willing to give up 5.8% wage to get option to telecommute. Comp diff estimates are mostly wrong signed—e.g., you would have to give people 24.3% wage to get them to accept the option to telecommute.